We continue our series of stories on the leading geographic markets for data center space. Data Center Frontier is partnering with DatacenterHawk to provide in-depth market reports on each city we profile. Read on for an in-depth look at how strong demand for data center space in Northern Virginia is driving market growth.
Northern Virginia is the home of the cloud, housing huge chunks of the infrastructure supporting public clouds operated by Amazon, Microsoft, Google and Oracle, as well as hyperscale players like Facebook and Apple and data-driven companies Uber, LinkedIn and Dropbox.
As the cloud computing arms race accelerates, the battle will be waged with data centers. The leading players are moving quickly to amass capacity for the clouds to come, resulting in huge deals for data center space under development.
- Cloud computing market leader Amazon Web Services has about 25 data centers spread across Northern Virginia, and is adding data center capacity almost as fast as it can be built. AWS has leased nearly 1.3 million SF of powered shell space from Corporate Office Properties Trust over the past three years, according to SEC filings, all of it in Northern Virginia. That includes three new data centers that were built in Ashburn in 2016. AWS also added significant capacity in Manassas in Prince William County in 2016, and has new data center projects planned in both Manassas and nearby Haymarket that may come online in 2017 and 2018.
- Microsoft has also been a major player in Northern Virginia. In 2016 it leased 22 megawatts of data center space at CyrusOne’s Sterling II facility, which went from dirt to completion in just six months. Microsoft also reportedly signed a large lease in Manassas with CloudHQ, a new company led by Hossein Fateh, an experienced hand in the Virginia market from his tenure as CEO of DuPont Fabros.
- Oracle is the major new player in the cloud leasing scene, and has moved aggressively to build a wholesale data center footprint in Northern Virginia. Oracle leased about 20 MW of space from three providers, according to data from North American Data Centers.
Meanwhile, there is still plenty of demand for colocation deals of 1MW and below. More than 60 percent of the searches on space on datacenterHawk in the most recent quarter were for colocation requirements, with an average deal size of 393kW of capacity.
Collectively, these factors suggest robust demand for data center space in Northern Virginia going forward. Several recent reports from real estate companies tracking the market note that data center supply has closely tracked demand in Northern Virginia for the last five years, even as deals have increased in size.
Our sources indicate that demand for large wholesale space requirements have resumed in early 2017 after a brief pause around the 2016 election.
Trends in Supply
Data center developers continue to buy up land and properties in Northern Virginia, seeking to keep pace with historic demand for server space for cloud computing providers. The past year has seen an unprecedented level of data center construction, as well as real estate transactions to lock down development sites for future data center campuses.Our sources indicate that demand for large wholesale space requirements have resumed in early 2017 after a brief pause around the 2016 election.Click To Tweet
There is currently 73 MW of data center capacity under construction in Northern Virginia, with a whopping 498 MW of future capacity announced and in the planning stage.
Most of Northern Virginia’s largest data center residents have already procured substantial pieces of property for their next phase of growth:
- Digital Realty has acquired 126 acres of land in Ashburn and intends to construct an additional 2 million square feet of space. The existing Digital Ashburn campus spans nearly 1.5 million square feet of space in nine buildings to support tenants like Amazon Web Services, LinkedIn and major financial service providers.
- DuPont Fabros Technology (DFT) is building its ACC9 data center, and expects to deliver 14MW of capacity in the third quarter of 2017. The new facility is across Waxpool Road from DFT’s Ashburn Corporate Center (ACC) cloud campus, which houses more than 1.6 million square feet of data center space, spread across six huge buildings — including several that are more than 1,100 feet in length.
- Equinix is near capacity on its original Ashburn campus and has broken ground on the first of five planned data centers on a 40-acre parcel that will be the company’s “North Campus” in Ashburn. Equinix expects to invest at least $1 billion on its North Ashburn campus over the next 10 years. In February 2017, Equinix acquired an additional 34 acres of land along Waxpool Road in Ashburn, providing additional room for expansion.
Additional property acquisitions can be found in the Data Center Frontier Special Report: The Northern Virginia Data Center Market.
Beyond the new greenfield construction, there are several companies marketing powered shells — existing buildings with undeveloped space, with the power and fiber connectivity already in place. The largest player in this market is currently COPT, which has been building powered shells to lease to Amazon Web Services. H5 Data Centers offers powered shell space in Ashburn, while Lincoln Rackhouse is marketing several former Digital Realty properties in Herndon (acquired via Netrality).
In 2016 CyrusOne acquired a powered shell from DBT-DATA in Sterling for a 12 MW client requirement. DBT-DATA, which has been an active player in the powered shell market in recent years, has recently shifted its focus to marketing development sites with entitlements in place, including properties in Ashburn and Sterling.
Mindful of concern that development sites are growing scarce in the area surrounding the Equinix campus in Ashburn, officials in Loudoun County will soon be releasing a list of 43 development sites appropriate for data center projects.
Development Opportunities Remain
The Loudoun County office of economic development says additional power infrastructure from Dominion Virginia Power has opened land along Route 50 and Route 606 for development, including sections of Sterling near Dulles Airport where DBT-DATA and Amazon have sites under development.
Loudoun County says there are also some redevelopment opportunities, where owners of sites with existing buildings are open to selling to data center companies — a trend already seen in Santa Clara in the supply-constrained Silicon Valley market. An example is in Reston, where CoreSite has acquired the Sunrise Technology Park for redevelopment as a data center campus.
Meanwhile, undeveloped land in Ashburn’s “Data Center Alley” continues to grow in value. Recent media reports indicate Equinix paid $34.5 million for a 34.5 acre tract off Waxpool Road adjacent to the 1757 Golf Course, or about $1 million an acre.
Data center development activity has been shifting to Manassas in Prince William County, where Iron Mountain and Amazon are each developing new data center campuses. In 2016, Prince William designated nearly 10,000 acres of land as a Data Center Opportunity Zone Overlay District, amending zoning language to clarify data center development as a permitted use and establishing a fast-track for rezoning requests and expedited reviews for electrical substations.
New market entrants are also possible. CloudHQ and Lincoln Rackhouse were new arrivals in the Northern Virginia market 2016, and in December were joined by Central Colo, which acquired an interest in the Tyson Technology Center in Tysons Corner.
In our next article, we’ll take a closer look at the business environment in the Northern Virginia data center market.
For more on the Northern Virginia market, we invite you to download the Data Center Frontier Special Report: The Northern Virginia Data Center Market, sponsored by RagingWire Data Centers.