Huge Cloud Expansion Underway in Amazon US East

ASHBURN, Va. – Amazon Web Services is aggressively adding data centers in Northern Virginia to boost capacity for its Amazon US East region, the company’s largest cluster of cloud computing server farms.

The expansion supports the rapid growth of Amazon Web Services’ lucrative cloud operation, which faces growing competition from Microsoft, Google and Oracle. The three tech titans are also building and leasing data centers as they race to gain ground on Amazon.

Northern Virginia is one of the primary battlegrounds in the cloud war. It’s of major strategic importance to Amazon Web Services (AWS), whose Amazon US East region spans more than 25 data centers across Loudoun and Prince William counties.

A key player in Amazon’s expansion is Northern Virginia is Corporate Office Properties Trust (COPT), a real estate investment trust that is a leading landlord for the U.S. government and defense contractors. COPT is known for leasing specialized space for national security tenants, but has quietly become one of the largest providers of cloud computing real estate.

1.3 Million SF of Data Centers

COPT has leased nearly 1.3 million square feet of data center space to Amazon Web Services over the past three years, according to SEC filings, all of it in Northern Virginia. That footprint spans eight different leases with Vadata Inc., the business unit that operates Amazon’s data centers, with annual rent of $15.3 million.

COPT recently delivered two new data centers to a tenant in Ashburn, and will complete a third facility later this year. Industry sources say the tenant is Amazon, and that the cloud builder is also the likely customer in two data centers COPT is building in nearby Manassas. Between them, the five new data centers span more than 815,000 square feet of data center space to be deployed over 15 months.

The developer doesn’t specify which of its buildings are leased by Amazon, consistent with its emphasis on confidentiality in working with government agencies. That aligns with the approach at AWS, which is careful in its disclosures about the infrastructure supporting its massive cloud computing operation, which now generates nearly $10 billion in annual revenue.

US East: Where Amazon’s Cloud Began

While the Amazon Web Services cloud spans the globe, a huge chunk of its Internet infrastructure is concentrated across Loudoun and Prince William counties in northern Virginia. It’s America’s busiest Internet intersection, the place where all the networks meet, anchored by the Equinix interconnection hub in Ashburn. That’s why Amazon’s initial company-built data centers sprang up in Ashburn and Sterling (the town next door).

These initial data centers form the nucleus of Amazon US East, its oldest and largest of its cloud regions. Amazon doesn’t disclose the full scope of its infrastructure, but third-party estimates peg its U.S. data center network at about 700 megawatts of IT capacity, with as much as 500 MW of that total focused in US East.

The recent construction builds on Amazon’s existing footprint. The company operates nine data centers in Sterling and six in Ashburn (with three more under construction) as well six in Manassas (with two more in the works). The company also has two data facilities in Chantilly, and is planning to expand its infrastructure into Haymarket in Prince William County.

Why Northern Virginia Matters

Amazon’s huge presence is one reason why Northern Virginia is the home of the cloud. Loudoun County is home to more than 60 data centers, with 6 million square feet of data center space, while Prince William County says it hosts an additional 2 million square feet of data centers. Microsoft and Oracle have both been beefing up their data center capacity in “Data Center Alley” this year.

Northern Virginia is a market COPT knows well from its work with government agencies and systems integrators. COPT Data Center Solutions owns more than 60 data center facilities, representing about 3.5 million square feet of space. A big chunk of that – more than 1.5 million square feet – is built for U.S. Government and defense contractors, the company says. Service provider customers include Northrop Grumman (which operates two data centers for the Virginia Information Technologies Agency) and Computer Sciences Corp and AT&T, which each lease about 300,000 square feet of space from COPT.

Amazon’s single-tenant buildings represent about a third of the data center footprint for Corporate Office Properties Trust. COPT also operates the DC6 wholesale data center facility in Manassas (formerly known as PowerLoft).

Amazon’s Data Center Template

In its work with Vadata/Amazon, COPT builds out powered shells: undeveloped space with the power and fiber connectivity already in place. Amazon then fills the building with its custom-built data center infrastructure. Amazon fine-tunes its custom servers, storage and networking gear to get the best bang for its buck, offering greater control over both performance and cost.

Amazon standardizes its data centers to house between 50,000 and 80,000 servers, according to company presentations. That consistent approach can seen in COPT’s recent projects. All three of the new Ashburn data centers are 149,000 square feet, as are three of the data centers COPT has built and leased in Manassas.

Amazon Web Services has improved its profit margin in recent months, which company executives credit to the data center operation.  “We’ve been seeing some great efficiencies in our infrastructure, both internally as Amazon and also as part of AWS,” said Amazon CFO Brian Olsavsky in the company’s recent earnings call. “We have great people working on not only better efficiency, but also driving cost out of our acquisition prices.”

The relationship with Amazon also appears to be helping COPT’s bottom line. Over the past year, the REIT’s revenue from leasing data center shells has grown from $5 million per quarter to $7.3 million per quarter. COPT has also benefited from improved leasing at its DC6 wholesale facility, filling 15.7MW of the available 19MW of power, boosting revenue from $3.8 million per quarter to $6.8 million per quarter.

COPT’s success in the cloud sector led to a $104 million gain from a deal in which it formed a joint venture with GI Partners, one of the most experienced data center investors. The venture, known as GI-COPT DC Partnership, acquired six of COPT’s single-tenant data centers, including several leased by Amazon Web Services. “This venture demonstrates the strength of demand for strategically located data center properties leased to high credit tenants,” said Stephen Budorick, President & CEO of COPT.

The New Frontier: Haymarket

Amazon isn’t done expanding its cloud infrastructure in Northern Virginia. The new frontier for Amazon US East appears to be Haymarket, a small town just west of Manassas. Vadata has applied for generator permits totaling 75 megawatts at a site in Haymarket. The development timeline on this expansion is not clear, as a proposed Dominion Virginia power line to support Amazon’s growth has been delayed by lengthy wrangling.

Dominion’s plan for an overhead 230kV line has been opposed by a group of local residents, who have termed the project a “very expensive extension cord” for Amazon. The Coalition to Protect Prince William County wants Dominion to divert the power line or bury it in sensitive areas close to homes and wildlife. The state of Virginia will have the final say, but has been considering arguments and motions in the case for more than a year.[clickToTweet tweet=”An overhead power line has been opposed by Haymarket residents, who call it an expensive extension cord for Amazon. ” quote=”An overhead power line has been opposed by Haymarket residents, who call it an expensive extension cord for Amazon. “]

An interesting wrinkle in Amazon’s infrastructure is the geography of Amazon’s specialized cloud for government IT workloads, which is currently hosted in the Pacfic Northwest rather than Northern Virginia. GovCloud is an isolated AWS region designed to host sensitive data and regulated workloads in the cloud, while meeting strict U.S. government compliance requirements. AWS was one of the first cloud providers to meet the Federal Risk and Authorization Management Program (FedRAMP) High baseline, a set of security requirements for cloud services that includes over 400 security controls.

The Road Ahead

Amazon may yet extend GovCloud to its US East region. In the meantime, Amazon’s relationship with COPT may help reassure federal and local government agencies that the Amazon US East facilities meet their requirements.

“Security is in COPT’s DNA,” the company says, noting its historic focus on security. That includes Anti-Terrorism/Force Protection (ATFP) compliance, with a controlled perimeter greater than 150 feet from the building, biometric access controls, man traps, video surveillance zones, and extensive experience building SCIF (Sensitive Compartmented Information Facility) space for government clients.

What seems clear is that the cloud-driven building boom in Northern Virginia is likely to continue. There’s at least 4 million square feet of cloud data centers being planned in Loudoun and Prince William counties, including the new projects in the pipeline for Digital Realty, DuPont Fabros Technology, Equinix, RagingWire, INFOMART, Sabey and Iron Mountain.

That’s why Amazon is busy building as well, ensuring it doesn’t run out of capacity for the clouds to come.

“There’s plenty of room for multiple vendors in this business,” said Amazon’s Olsavsky. “What we focus on is innovating on behalf of customers and expanding the geographic footprint to make our services more widely available.”