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Northern Virginia Data Center Market: The Focal Point for Cloud Growth

By Rich Miller - April 18, 2019 Leave a Comment

Northern Virginia Data Center Market: The Focal Point for Cloud Growth

An aerial view of major facilities in Data Center Alley in Ashburn, Virginia. (Image: Loudoun County)

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The Northern Virginia Data Center Market is currently amid a data center building boom unlike any the industry has ever seen, according to an in-depth market report from Data Center Frontier and datacenterHawk.  As data center REITs and colocation providers compete to provide capacity for cloud services providers with big needs, the region is seeing an unprecedented surge in development and demand.

Northern Virginia Data Center Market

Download the new Special Report covering the Northern Virginia Data Center Market.

Northern Virginia is home to more than 100 data centers and more than 10 million square feet of data center space. As the cloud grows, having servers in the region has become the table stakes for companies with ambitions in cloud computing. The area is unique in its connectivity.

The region traces its connectivity roots back to to the U.S. Government’s early development of wide-area fiber optic networking in the late 1960s, and includes a variety of towns in Loudoun, Prince William and Fairfax counties. Much of the activity focuses on a fiber-rich area in Ashburn known as “Data Center Alley.”

As of September 2018, Northern Virginia was home to 4.7 million square feet of commissioned data center space, representing 955 megawatts of commissioned power. Demand remains very strong reflected in a vacancy rate of only 4.4 percent as of 2018.

In fact, the volume of data center capacity in the planning phase in the region has reached 1,097MW, or 1.1 gigawatts. These numbers reflect both new players entering the markets, as well as major expansions by experienced players.

2018: A Big Year for the Northern Virginia Data Center Market

Data center operators in Northern Virginia leased 270 megawatts of capacity in 2018, more than doubling the previous record for annual absorption, according to data from Jones Lang LaSalle, which said the region accounted for 55 percent of all data center leasing nationally.

That activity is accompanied by record valuations for land in Data Center Alley. The region’s colocation and wholesale data center providers don’t expect demand to slow anytime soon. In fact, the region is experiencing a surge in what is known as “land banking,” as developers buy up property to secure space for still more growth in the region in the future.

According to datacenterHawk, 157MW of commissioned data center capacity was either absorbed or pre-leased in Northern Virginia in just the second quarter of 2018. To put that into perspective, the number exceeds the annual industry record of 115MW for the entire year, a record that Northern Virginia hit in 2017. The area also was home to the largest deal in the history of the data center industry when a single tenant signed a pre-lease for 72MW of capacity with CloudHQ this year. This more than doubles the 35MW leased by the anchor customer in CloudHQ’s Manassas MCC1 project in 2016.

The Northern Virginia data center market is spread across a number of towns in Loudoun, Prince William and Fairfax counties, and shows signs of expanding into adjacent counties. (Photo: RagingWire Data Centers)

The Northern Virginia data center market is spread across a number of towns in Loudoun, Prince William and Fairfax counties, and shows signs of expanding into adjacent counties. (Photo: RagingWire Data Centers)

Why Northern Virginia?

Ashburn is the Internet’s boom town. It sits atop the world’s densest intersection of fiber networks, making it an ideal location to store and distribute data. It is unique in its connectivity, and its data centers are laying the physical foundation of the digital economy.

Why is Ashburn, which lies about 30 miles west of Washington in Loudoun County, such an important site? It was home to MAE-East, the Internet’s first major interconnection point. A startup called Equinix built its first data center in Ashburn in 1998, providing a “carrier-neutral” facility where companies’ networks could tap into Internet backbones. The Equinix campus quickly become the Web’s busiest meeting place, creating a powerful network effect in which each new connection adds to the value of its digital ecosystem.

Location is key for data center providers, and Northern Virginia offers a strategic, cost-effective market for companies needing their data center in the northeastern United States. There is also a relatively low threat for natural disaster, as other than occasional high winds and rain from hurricane remnants, the Northern Virginia market is typically very safe. Another key aspect drawing more and more data center providers to the region is affordable and reliable power costs, which are competitive among major colocation markets and reasonable considering the total cost of occupancy for long-term requirements. The primary power utility, Dominion Virginia Power, has a track record of reliable delivery for data centers.

A view of the roof of the new CloudHQ data center in Manassas, Virginia shows some of the 152 Kyoto Cooling units supporting the facility. (Photo: Rich Miller)

A view of the roof of the new CloudHQ data center in Manassas, Virginia shows some of the 152 Kyoto Cooling units supporting the facility. (Photo: Rich Miller)

And the region is simply ripe for business. Loudon County is the number one county in America for personal income, with an average household income reaching beyond six figures to $125,900, according to Census Bureau information. With an unemployment rate of 3.3 percent, and a sales tax exemption for data center customers that goes through 2035, it’s easy to see why the area is attracting the bigwigs of colocation.

Regional Data Center Trends to Watch 

Beyond regional trends in supply and demand, there are two specific trends surfacing in Ashburn, specifically. First, developers are building taller data centers to maximize the sellable space on each acre of land, and they are also buying offices or industrial properties and then demolishing existing structures to make way for data centers. These trends will work to influence the development and evolution of Data Center Alley in coming years. Those watching growth in the region will also have noticed developers are looking beyond Ashburn to Loudoun and Prince William counties.

As the largest data center market in the country, many of the trends that have gone on to shape the entire business originally stemmed from Northern Virginia. One emerging trend to watch is the widening gap between hyperscale and enterprise requirements, and whether this market segmentation prompts providers to focus on one of these niches or compete across all sectors.

As for trends in demand, Northern Virginia continues to be the “Home of the Hyperscalers”, touting the world’s largest concentration of cloud computing infrastructure. As cloud providers compete for clients and capacity, data centers will be the front line. As a result, the leading cloud computing players are working to amass capacity for the clouds of the future, which is ramping up demand in Northern Virginia and resulting in giant deals for data center space under development. Amazon Web Services, Facebook and Microsoft have always been focused on the region, but it is now also becoming a goal for expansion for companies like Google, Oracle, Salesforce and Chinese cloud providers, as well as data-driven companies like Uber, LinkedIn, Box and Dropbox.

northern virginia data center market

This strong demand has largely redefined the scale of data center leasing, which  is surging past previous records. Prior to 2016, it was unusual to see a wholesale data center lease exceeding 10MW of capacity. This year, the 72MW deal by CloudHQ made the new high in the market. Also illustrating the leasing boom, in just 90 days — the second quarter of 2018 — the Northern Virginia data center market saw more leasing than it saw in 2016 (113MW) or 2017 (115MW).

That’s why developers are rushing to keep up with strong demand. This past year has been an active one for data center construction, as well as real estate transactions for future data center campuses. There is currently 58MW of data center capacity under construction in Northern Virginia. But the big names in colocation are playing the long game these days, so it’s important to look into the future when considering data center supply in the region. At the close of the second quarter of 2018, developers and service providers had announced plans for an impressive 1,097MW and almost 8 million square feet of data center projects. And that total will be far larger by end of year.

top 2017 colocation news

Data center growth at Amazon Web Services, as reflected in these facilities under construction in Virginia, continues to make headlines. (Photo: Rich Miller)

What’s driving this growth? According to Data Center Frontier’s latest report on Northern Virginia,  insatiable demand real-time news, sports, music and video—an ocean of data that will soon extend to virtual reality, self-driving cars and the Internet of Things (IoT). It will certainly be interesting to see this demand/supply balance play out as the major players in Northern Virginia seek room for expansion, while new players buy land to join the action in Ashburn.

The growth of the data center sector has been good for the region.

“This year in Loudoun County we will have a quarter billion dollars of tax revenue from data centers,” said Buddy Rizer, Executive Director of Economic Development. “Data centers are the engine of innovation. They enable a lot of other businesses.”

Biggest Colo Players in Northern Virginia

As for the biggest players in the Northern Virginia Data Center Market, it reads like a who’s who of cloud providers, data center leaders and colocation giants.

Below is an overview of major data center and colocation providers in the Northern Virginia data center market:

  • Amazon Web Services
  • AT&T
  • Chirisa Tech Centers
  • CloudHQ
  • Cologix
  • Compass Datacenters
  • CoreSite
  • Corporate Office Properties Trust
  • CyrusOne
  • Cyxtera
  • Digital Realty
  • Element Critical
  • Equinix
  • Infomart Data Centers
  • Iron Mountain Data Centers
  • Lincoln Rackhouse
  • QTS Realty Trust
  • RagingWire Data Centers
  • Sabey Data Centers
  • Sentinel Data Centers
  • Vantage Data Centers
  • zColo

Explore the Northern Virginia colocation market further through Data Center Frontier’s special report series and ongoing coverage of the growing colocation industry in the top data center market in the country, which can be found below.

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Tagged With: Colocation, Data Center Site Selection, DCF Spotlight #2, Northern Virginia, Northern Virginia Data Center Market, RagingWire Data Centers

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.

Special Report Article Series

Northern Virginia Data Center Tax Incentives See Strong Return

December 12, 2018 By Rich Miller

Legislation making qualified data center facilities exempt from Virginia’s sales and use taxes went into effect in 2009. To qualify, data center providers must spend at least $150 million and create between 25-50 new jobs in the area. Those tax breaks have since been extended through 2035. A new Data Center Frontier report explores the business environment and the positive trends spurred by Northern Virginia data center tax incentives.

Northern Virginia Data Center Construction Hits New Heights in 2018

December 3, 2018 By Rich Miller

The past year has been an extremely active period for data center construction, as well as real estate transactions to lock down development sites for future data center campuses. There is currently 58MW of data center capacity under construction in Northern Virginia. But the larger story is the long-term outlook for dynamic growth in the region’s data center industry. A new Data Center Frontier series provides overview of the major hubs of data center activity in Northern Virginia.

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Northern Virginia is Home to the Data Center Hyperscalers

November 26, 2018 By Rich Miller

Northern Virginia is the Home of the Hyperscalers, with the world’s largest concentration of cloud computing infrastructure. As the cloud computing arms race accelerates, the battle will be waged with data centers. A new Data Center Frontier Series offers an overview of significant transactions and demand trends in Northern Virginia in 2018.

The Northern Virginia data center market is spread across a number of towns in Loudoun, Prince William and Fairfax counties, and shows signs of expanding into adjacent counties. (Photo: RagingWire Data Centers)

Northern Virginia Data Center Market Approaches 1 Gigawatt

November 12, 2018 By Rich Miller

Northern Virginia is the focal point for the explosive growth of cloud computing, which has made it the world’s largest data center market. It is currently undergoing an extraordinary data center building boom, the likes of which the industry has never seen. A new Data Center Frontier series explores why the market is so hot.

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Northern Virginia, the largest data center in the market, is seeing a surge in supply and an even bigger surge in demand. Ashburn, Va., within this market experiencing hyper growth, is known as “data center alley.” A new white paper from Aligned Energy provides a case study and outlines one data center provider’s process in building in the top colocation market in North America with the launch of Aligned Ashburn. 

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Data Center Jobs: International Leadership Opportunities

October 16, 2019 By Sarah Rubenoff

October’s top data center jobs on Data Center Frontier feature two international opportunities ‚ — one in Singapore, and one in Montreal — as well as two data center facility manager positions on the West coast.

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Northern Virginia: Less Hyper, But Still Plenty of Scale

October 3, 2019 By Rich Miller

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September 19, 2019 By Rich Miller

Aligned Energy has opened the doors at its first data center in Northern Virginia. Aligned Ashburn will showcase the company’s focus on efficiency and high-density cooling.

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Northern Virginia Data Center Market

Northern Virginia Data Center Market Extends Leadership Position

Northern Virginia is the focal point for the explosive growth of cloud computing, which has made the region the largest and most active data center market in the United States. Download the latest report from Data Center Frontier and RagingWire Data Centers that explores the Northern Virginia colocation market in detail.

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Northern Virginia Data Center Market

Northern Virginia Data Center Market Extends Leadership Position

Northern Virginia is the focal point for the explosive growth of cloud computing, which has made the region the largest and most active data center market in the United States. Download the latest report from Data Center Frontier and RagingWire Data Centers that explores the Northern Virginia colocation market in detail.

Get this PDF emailed to you.

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