Microsoft Buys Land in Dulles Cloud Corridor

Another hyperscale operator has acquired land in the fast-growing Dulles Cloud Corridor in Northern Virginia. Microsoft has reportedly bought 66 acres in southern Loudoun County, paying $93.7 million for the land.

The land deal could provide Microsoft with a data center availability zone adjacent to similar facilities for its leading rivals in the cloud computing wars. The property, known locally as the Quail Ridge Farm and renamed Arcola Tech Park, is about two miles from existing server farms for Amazon Web Services and Google. Microsoft’s purchase was first reported by the Washington Business Journal.

The Arcola Tech Park property is zoned for data center use, and is conditionally-approved by Loudoun County for up to 1.6 million square feet of data center development, with “significant entitlement work complete,” according to St. John Properties, which was one of the sellers along with JK Moving Services.

Microsoft paid about $1.4 million an acre for the land, the highest price yet in a series of transactions for data center properties in the Dulles Cloud Corridor, which includes the area immediately south and west of Dulles Airport, including properties along Route 50 and Loudoun County Parkway. Prices for data center development parcels in the corridor have been rising steadily, as Google paid just $425,000 an acre for its site in 2017, and CyrusOne paid about $1 million an acre for a nearby property in late 2018.

Bustling Activity in South Loudoun

This is the second major land purchase for Microsoft in Northern Virginia. In 2018 it acquired more than 300 acres of land near Leesburg, west of Data Center in Ashburn, where Microsoft operates significant cloud capacity in space leased from wholesale data center providers. The company has submitted plans for multiple data centers on its property in the Compass Creek project.

The Microsoft purchase comes amid accelerated development of huge data center campuses in the Dulles Cloud Corridor, with aggressive land banking by property developers and a steady stream of projects seeking zoning and permitting approvals. Recent highlights:

• Digital Realty plans to build the world’s largest multi-tenant data center campus with its Digital Dulles project, which will create 7.5 million square feet of space on a 424-acre site on the Western border of Dulles Airport.
• Amazon Web Services plans a large data center campus just south of Dulles Airport, which could add up to 2.5 million square feet of cloud computing capacity.
• Amazon is also seeking fast-track approval for the first of three data centers on a 90-acre property in South Riding, west of an existing AWS three-building campus in Arcola. The site plan calls for up to 900,000 square feet of data center space.
• 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.
• An Amazon affiliate has paid $54 million to acquire 2.4 million square feet in Herndon, East of Dulles Airport. The site, known as the Perspecta Property, houses a large office complex.

New Submarkets in Northern Virginia

Northern Virginia continues to be the most active data center market on earth, with leasing volumes that are the envy of every other region. The region is home to more than 100 data centers and more than 10 million square feet of data center space. Cloud platforms covet proximity to “Data Center Alley” in Ashburn, the world’s busiest Internet intersection.

The Dulles Cloud Corridor is about 10 miles south of Data Center Alley. As land in Ashburn has become scarce and expensive, developers are scouting 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.

The COVID-19 pandemic is driving demand for even more data centers. Since March, Loudoun County has received “fast track” applications for seven construction projects, representing nearly 3 million square feet of new data center space, according to Buddy Rizer, the Executive Director of Economic Development for Loudoun County.

“We’ve never been as busy as we are right now with the data center industry,” said Rizer. “It’s quite amazing.