As data center demand continues, data center providers are searching for land parcels that can meet latency requirements while still being able to provide several hundred of megawatts of power. This is causing providers to look away from traditional data center hubs and toward less developed areas.

Location shifts in data center development are very pronounced in markets like Dallas, Northern Virginia, and Phoenix. Respectively, South Dallas, Manassas, and Goodyear have each had an increase in data center development as vacant land is more available. In each of these areas, there has been growth from both colocation providers and hyperscale users.

Phoenix Center of Power | 3Q 2015 - 2Q 2022

Hyperscale and enterprise users' demand is one of the leading reasons for the location shift away from traditional data center hubs. This demand is noticed in the increase of pre-leasing that has recently occurred. Since 2019 the major North American data center markets have seen a 78.4% annual growth rate in pre-leasing. In order to accommodate this demand, data center operators use large parcels, often easier to find in undeveloped areas of a city, that can support several, multi-story data centers. This grants them the ability to not only meet the current demand, but also provides a growth path to be able to meet the future demand of these users.

Another reason drawing data center operators to new areas of data center development is the ease and speed of procuring power to a site compared to that of traditional data center hubs. Because this development is occurring in less developed areas, it is easier to construct the transmission and distribution infrastructure necessary to deliver power to a site. For example, in Manassas power can be delivered to a site quicker than in Ashburn because of the past and existing high project demand. Having quick delivery of power to a site is an attractive quality drawing data center development to these new data center development areas.

This can be visualized in the Phoenix market when looking at the change in the geographical center of commissioned power over time. In 2015, a majority of data centers in the market were located in Chandler or Central Phoenix. Since then, while development has continued there as well as in Mesa and North Phoenix, the recent westward trend can be attributed to the growth of development in western city of Goodyear where land more vacant.

The high data center demand is expected to continue to drive data center operators to undeveloped areas where land is vacant and power is more readily available.