Data Centers Are Flocking to Arizona: What CRE Brokers and Developers Need to Know

Arizona is experiencing a significant surge in data center development, positioning itself as a strategic hub for digital infrastructure in the United States.

These high-demand facilities support far more than just artificial intelligence. They serve as the foundational infrastructure for a wide range of digital services that power today’s economy.

From streaming services and cloud-based CRMs to e-commerce, IoT, and next-day delivery logistics, data centers store, process, and deliver the digital infrastructure behind nearly every modern service.

For commercial real estate professionals, this shift has real implications. In this article, we’ll cover:

• The Power Demands of Data Centers
• What Makes Arizona a Good Location for Data Center Development
• Data Centers and Sustainability in the Desert
• What Brokers and Developers Need to Know

The Surging Power Demands of Data Centers

Data center development is booming.

In 2024, the United States data center construction market was valued at $48.18 billion. It is expected to reach $112.33 billion by 2030, reflecting a CAGR of 15.15%.

With AI, machine learning, and high-performance computing driving demand for more infrastructure, power is a defining constraint on new data center builds.

• According to Goldman Sachs, AI is projected to drive a 160% increase in data center power demand by 2030. By then, data centers could consume up to 8% of total U.S. electricity.
• The International Energy Agency (IEA) forecasts that electricity consumption from data centers could double by 2026.

In short, more data means more computing. More computing means more power.

Finding real estate that can support that level of energy use is now a priority in site selection.

Data Center Site Selection: Why Arizona?

Greater Phoenix, and Arizona more broadly, has emerged as a national hotspot for data center development. Why? Reliability, cost benefits, and existing infrastructure.

• Low risk for natural disasters that could affect uptime.
• Inexpensive power cost due to a diverse fuel mix from multiple providers.
• Abundant sunshine makes it ideal for powering data centers with solar energy.
• High-quality colocation and cloud providers already exist in the region.
• Tax abatement opportunities stemming from Arizona’s Computer Data Center Program, established in 2013 under A.R.S. § 41-1519.
• The availability of expansive, relatively low-cost land is ideal for hyperscale and multi-phase data center campuses.

Major players in data creation and storage, including Apple, PayPal, American Express, AT&T, and Meta, have already established data center operations in Arizona.

Micro-Trends: Where Developers Are Looking

• East Valley (Mesa, Chandler, Gilbert): Proximity to fiber corridors and substations.
• West Valley (Goodyear, Buckeye): Abundant land and growing utility infrastructure.

Data Centers and Sustainability in Arizona

Arizona’s open land and strong solar potential make it a prime location for data centers, and yet some people have raised concerns about water use and environmental impact.

Water Use: Myths vs. Reality

Common Concern: “Data centers use too much water for a desert state like Arizona.”

Water concerns in Arizona’s desert climate are valid; however, data centers have a relatively small impact, and the state’s water resources are carefully managed.

Modern Cooling Cuts Consumption

Most new data centers rely on air cooling or hybrid systems with closed-loop cooling, which drastically reduce or even eliminate water usage.

For example:

• Since 2024, CyrusOne data centers in Chandler have used zero-water cooling.
• Microsoft is implementing a zero-water evaporation, closed-loop design in its upcoming facilities.

Data Centers Are a Small Part of Arizona’s Water Budget

Although computing infrastructure is expanding, data centers account for a small and manageable portion of the statewide water use.

Analysts from Bluefield Research found that, “data center water consumption in Arizona in 2025 will be roughly 905 million gallons…It’s less than a tenth of one percent of the state’s annual water use.”

Arizona Isn’t Out of Water

Despite being a desert, water demand in Arizona has declined 16% since 1985, even as population and GDP more than doubled. This is driven by smarter water practices, especially improvements in agricultural efficiency.

The system is adapting and holding, provided development continues to prioritize conservation.

What Brokers and Developers Need to Know

As demand for data centers continues to surge, CRE professionals are navigating a fast-evolving landscape.

Whether you’re brokering land, guiding site selection, or structuring deals, here are the key trends and considerations shaping the market today:

Power access is driving site value.

Fiber lines and water rights still matter, but energy readiness is becoming the dominant site selection variable (particularly access to substations or solar partnerships with APS and SRP).

Bottom Line: Brokers familiar with utility planning processes have an edge.

Emerging submarkets are heating up.

West Valley submarkets, like Goodyear and Buckeye, are gaining traction as East Valley land tightens.

Bottom Line: Developers who engage early in utility and zoning coordination may have greater flexibility to shape large-scale or customized campuses.

Tax incentives are locked in and should be leveraged.

Arizona’s extension of the Computer Data Center Program through 2033 provides reliable tax relief on equipment and construction costs.

Bottom Line: For complex, multi-phase builds, these incentives help offset capital expense and support more aggressive timelines.

A Trusted Partner for High-Stakes Transactions

As commercial development evolves to meet new infrastructure demands, transactions are becoming more layered, often involving multi-phase builds, regulatory coordination, and nuanced timing.

Arizona Escrow & Financial brings nearly 50 years of experience navigating these complexities, offering dependable support for high-stakes projects.

Reach out to learn how we can help you navigate the intricacies of commercial real estate escrow with precision for seamless closings.