Lincoln Property Co.’s Phoenix-Area Data Center Needs Work

Lincoln Property Company is the buyer of a 191,000-square-foot data center in one of the nation’s biggest markets for the asset class, where vacancy is under 2 percent.

The Dallas-based company bought the data center at 2500 West Frye Road in Chandler and a substation on-site from CBRE Global Investment for $130 million, the Phoenix Business Journal reported. The price amounts to $681 per square foot or $4.6 million per megawatt.

It’s a fixer-upper.

The company plans to build another data center on the site and to build out unused parts of the existing facility.

The purchase is part of Lincoln’s nationwide strategy to find underutilized or undercapitalized sites in core data center markets.

Metro Phoenix is the country’s fourth-largest data center market, according to CBRE. Steady demand and absorption have lowered vacancy rates.

The West Frye Road site originally housed a manufacturing facility built in 1988. It was converted into a data center in 2002. Bank of America acquired the property in 2008; soon after, Salt River Project built a substation at the site. In 2019, Bank of America split the parcel and sold the data center and adjacent substation.

Three years ago, Chandler began requiring data centers to have specific zoning. Mesa and Tempe passed similar ordinances, while Phoenix this year adopted new regulations for data center infrastructure.

Lincoln’s property does not meet requirements of Chandler’s revised zoning code. The building’s seller worked to have the site rezoned to allow a data center there last year, simultaneously proposing a three-story, 243,000-square-foot expansion to the facility. As part of an agreement with the city, the owner was required to remove the data center’s water-based cooling system.

Lincoln will have to update the data center to use an air-based cooling system. The existing building is about 15 percent occupied, with much of the space being vacant due to a lack of electrical and mechanical infrastructure. Once Lincoln completes the cooling system changes, it can build out the rest of the facility to add 16 megawatts of power and space for more users; currently, the property offers 28 megawatts of power.

— Chris Malone Méndez