With more than a hundred 100F (37.7C) days a year and a persistent drought, on paper Phoenix, Arizona is one of the last places you’d expect to find cloud and colocation providers setting down roots.

Yet, Google has just broken ground on a $1 billion, 750,000 square feet datacenter campus in Mesa, east of Phoenix and to the west in Goodyear, Microsoft has a five-datacenter campus under development.

So what gives? Why would two of the largest cloud providers choose to build datacenters — facilities that require copious amounts of land, power, and a huge amount of water — in such a hot and arid place?

Say what you will about it being a dry heat, but there’s a lot going for the region, according to Omdia analyst Alan Howard who tracks the datacenter market and also happens to live in Phoenix.

What a datacenter needs

Datacenters exist to make money, either by hosting servers in the case of a colo or on-prem facilities or the workloads services themselves in the case of the cloud, and this means a confluence of factors need to align for a location to be economical.

Of course, we can’t talk about construction without touching property cost and tax incentives. As a general rule, datacenter operators like to build where land, operational costs, and taxes are low.

A state bill signed into law in early 2021, extended tax breaks on the use, installation, assembly, repair or maintenance of datacenter equipment, for most Arizona datacenter valued in excess of $25 million through 2033. However, cheap land and favorable tax incentives aren’t the only thing cloud providers are looking for.

“The tax incentives are clearly appealing… but