DuPont Fabros Entering Phoenix Data Center Market

DuPont Fabros Technology is the latest developer to enter the Phoenix data center market. The company has acquired a 56-acre parcel of land in Mesa, the Phoenix suburb where Apple is building a massive, $2 billion data center, and is going to start building there as soon as it signs a pre-lease with a customer.

DuPont Fabros CEO Chris Eldredge announced the land deal on the company’s earnings call last week. “We currently plan to hold this land in our land bank and will require a pre-lease to develop this land near term,” he said.

Phoenix and the surrounding area constitute one of the top US data center markets. Besides single-user corporate data centers by the likes of eBay, Oracle, and SAP, some of the largest data center providers, such as ViaWest, CyrusOne, Digital Realty Trust, QTS, and IO, among others, have substantial footprint in the market.

This is a new market for DuPont Fabros, which currently has facilities in Northern Virginia, Chicago, and Silicon Valley, while building in the Portland and Toronto data center markets.

After beating its own 2015 annual leasing record last year, the developer is keeping foot on the gas pedal in 2017. On the earnings call, the company’s executives said they expect to spend between $600 million and $650 million on construction this year.

The land purchase in Mesa is strategic for more reasons than geographic expansion. “Improving our land bank is also key,” Eldredge said, citing the deal as a step made to keep that land bank growing.

Explaining the decision to buy land in Mesa, he said supply of available land in the more data center-dense Chandler is getting tight, especially following Intel’s recent announcement that it would resume construction of a $7 billion, 3,000-employee chip fabrication facility there.

“It's going to be harder and harder to develop data centers in Chandler,” he said. “And we think that Mesa land is something that's really good for us to have, and we think it's a market that could potentially be strong, but we're not going into the market without a pre-lease.”