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You are here: Home / Cloud / A New Cloud Corridor Emerges South of Ashburn

A New Cloud Corridor Emerges South of Ashburn

By Rich Miller - August 23, 2019 1 Comment

A New Cloud Corridor Emerges South of Ashburn

A new data center and adjacent substation in Arcola, Virginia. (Image: Google Maps)

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A new cloud corridor is emerging in Northern Virginia, and land prices are rising as data center developers lock down prime development parcels.

This new surge in data center activity is centered around Arcola in Loudoun County, just west of Dulles Airport. Amazon Web Services has deployed four data centers in the area, with more on the way. Google, Digital Realty and CyrusOne have bought up a combined 550 acres of land, laying the groundwork for millions of square feet of future data center development.

Arcola is about 10 miles south of “Data Center Alley” in Ashburn, which houses the largest cluster of cloud computing facilities in the world. Northern Virginia is the world’s largest data center market, with more than 100 data centers and 1 gigawatt of IT capacity. The appetite for cloud capacity has prompted a burst of data center leasing and land deals in Ashburn, as data center developers prepare for the next phase of cloud growth.

But land in Ashburn has become scarce and expensive, prompting developers to scout nearby locations that offer proximity to Ashburn, but with more room to grow. This has boosted development in Prince William County, as well as areas further south in Loudoun County.

One sign of the data center industry’s focus on Arcola is rising land prices, a trend that generated local headlines when vacant land near Route 50 changed hands for more than $1.1 million an acre. The 90-acre plot was purchased for $20 million in June 2018 by JK Moving, which was able to sell it on July 30 – 13 months later – for five times that amount, according to the Washington Business Journal.

The buyer, a Colorado-based LLC, acquired the site for $98.7 million and promptly resold it to Vadata, the data center development arm of Amazon Web Services, for $116.4 million. The $17.7 million mark-up likely will cover the cost of site improvements for Vadata, according to the Business Journal.

Land Banking Writ Large

The purchase comes amid a period of active “land banking” in Northern Virginia, as data center developers scramble to acquire property for future development amid torrid demand from both cloud computing companies and the enterprise sector. The region is seeing unprecedented activity in both leasing and new construction, with new players entering the market and established companies looking to expand.

Amid that growth, data center development is beginning to spread outward from “Data Center Alley,” the cluster of data centers around the Equinix connectivity hub in Ashburn. One factor is the rising value of real estate near Data Center Alley, where vacant land is scarce and fetches more than $1 million an acre, and properties with existing buildings have sold for as much as $2.1 million per acre.

The leading beneficiary has been Prince William County, where a growing cluster of data centers has emerged near Manassas. County officials said this week that Prince William County is now home to more than 5 million square feet of data center space. The county’s 41 data center projects have led to more than $9 billion in capital investment and created more than 1,170 jobs, according to the county Department of Economic Development.

Prince William had an active 25 megawatts of data center leasing during the first half of 2019, according to site selection strategist Allen Tucker.

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Land Values Double in Two Years

Data center developers have begun land banking in earnest in Arcola, around the intersection of Route 50 and Route 606 (Loudoun County Parkway). The first to arrive was Amazon Web Services (AWS) with two data centers south of Dulles, and followed with two more buildings just west of the airport.

Activity in the area has accelerated over the past two years, with deal valuations rising steadily:

  • In November 2017, Google confirmed the purchase of 91 acres of land for a data center campus in Arcola, just off Route 606. The company paid $39 million, or about $425,000 an acre.
  • In February 2018, an affiliate of Amazon proposed a 600,000 square foot data center campus on 44 acres just off Route 50.
  • In September 2018, Digital Realty agreed to acquire a 424-acre property adjacent to the airport’s western boundary, known as the Western Lands. Digital Realty paid $236 million, or about $558,000 an acre.
  • Also in September 2018, CyrusOne acquired 39 acres of land at the intersection of Old Ox Road and Route 606 for a future data center campus. CyrusOne paid $38.9 million in cash, or just shy of $1 million an acre. The seller was a joint venture between JK Moving and DBT Data, which purchased the land two years earlier for $12 million.

The Washington Business Journal has noted the lucrative investments by JK Moving, a Sterling-based company whose primary business is moving services for corporate and residential clients. JK President Chuck Kuhn is also an active real estate investor who has done particularly well selling land to data center developers.

Loudoun County has been generally supportive of data center development in Arcola and the Route 50 corridor, but residents are sensitive to the details of expanding the area’s power capacity. In 2015, a group of residents formed “No Towers on 50” to share concerns about the path of a high-capacity power line to support the new Poland Road Substation, located near one of the area’s new data centers. Dominion Energy agreed to reroute the transmission line to avoid some residential areas and parts of Route 50, and the substation was completed in 2018.

Will there be more data center development in the growing cloud corridor in South Loudoun? As in Ashburn, land owners in the Arcola area have likely noted the recent sale prices. JK Moving still owns about 350 acres of land along Route 50, adjacent to the parcels in the Vadata deal.

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Tagged With: Arcola, Dulles Cloud Corridor, Loudoun County, Northern Virginia

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About Rich Miller

I write about the places where the Internet lives, telling the story of data centers and the people who build them. I founded Data Center Knowledge, the data center industry's leading news site. Now I'm exploring the future of cloud computing at Data Center Frontier.

Comments

  1. drwiseone@yahoo.com'Donald R. Wise says

    December 30, 2019 at 3:55 pm

    I am interested in the contractors who build data centers in Virginia since this has been a growing market for data centers. I’m amazed at the cost to construct a data center. No one talks about the revenues construction companies are deriving from these projects. Is there a listing detailing contractors and revenues earned from 2017 – 2019? If so, is this information available to the general public for viewing?
    Thanks for any help you can provide.

    Reply

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