AI Firm Pays $22.7M for Phoenix Warehouse After Dodging New Zoning Rules
AI infrastructure company 5C AI acquired a Phoenix warehouse for $22.75 million, bypassing new city data center zoning rules through a claim made under Arizona's Private Property Rights Protection Act (Proposition 207). This development occurs amid growing statewide friction over data center expansion, leading to calls for a moratorium and a suspension of tax incentives. The new Phoenix ordinance, G-7396, was designed to introduce special permits and noise limits for data centers.
5C AI, an AI infrastructure company, has acquired a 113,414-square-foot warehouse in Phoenix for $22.75 million, planning to convert it into a data center. The company utilized Arizona's Private Property Rights Protection Act (Proposition 207) to secure a binding waiver from the Phoenix City Council, allowing it to bypass new city zoning Ordinance G-7396.
Ordinance G-7396, adopted by the City Council on July 2, 2025, introduced stricter requirements for data centers in commercial and industrial zones, including special permits and noise limits of 55 decibels during the day and 45 decibels at night. 5C AI argued that these new regulations diminished the property's value, leveraging Proposition 207, which mandates municipalities to compensate property owners for value loss due to new land-use rules or grant waivers.
The deal highlights broader tensions over data center growth in Arizona. As of March 2026, at least 11 property owners had filed Prop 207 claims against Phoenix due to the 2025 ordinance. Separately, developer Vintage Partners abandoned plans for a data center in Phoenix's Laveen area, opting for a residential and commercial project instead, after the city's noise updates and utility cost restructuring.
Arizona Attorney General Kris Mayes has called for a statewide pause on new data center approvals, citing intense demands on power and water, and rising residential electricity bills. In June, Arizona also enacted a three-year suspension of tax incentives for new data center builds under the Computer Data Center Program. Research from Arizona State University indicates data centers contribute to elevated nighttime temperatures in surrounding Phoenix neighborhoods.