The biggest player in the biggest data center market has announced its biggest expansion yet. Digital Realty plans to build up to 2 million square feet of new space in the heart of “Data Center Alley” in Ashburn, Virginia.
The announcement capped an epic month for the northern Virginia market, in which Equinix broke ground on a 1 million square foot expansion, CyrusOne added more data center space, and DuPont Fabros completed a flurry of leasing in which it filled one huge data center and most of a second facility.
Cloud computing has been a business bonanza for the data center industry, and nowhere more so than northern Virginia, where connectivity, cost and capacity combine to create an ideal environment for cloud campuses. The region has built upon its history as a hub for Internet networks, and it will remain so for years to come.
That status has been cemented in the past year as the largest data center companies have bought up hundreds of acres of land for future development, ensuring compute capacity for the clouds to come.
“Data center demand is stronger today than it’s ever been in our 11-year history as a public company,” said Bill Stein, the CEO of Digital Realty, in an earnings call last Thursday. “I think you’ve seen that momentum reflected in the recent leasing activity reported by our publicly traded data center peers.”
25 Megawatts Leased by One Company, in One Month
Stein is likely referring to DuPont Fabros Technology (DFT), which leased more than 25 megawatts of capacity in northern Virginia in October, including its entire ACC2 data center. The 10.4-megawatt facility was vacated by Yahoo at the end of its lease, and was immediately filled by an unnamed super-wholesale customer. DFT also leased 6 megawatts at its new ACC7 data center, and added a significant new tenant in Alexio, which acquired the space and customers of Net Data Centers, which filed for bankruptcy earlier this year.
“We’re seeing a tremendous amount of demand in our core markets,” said Chris Eldredge, the CEO of DuPont Fabros. “The cloud is really having a serious impact on what we’re seeing in the market in Northern Virginia.”
Northern Virginia is perhaps the most connected piece of Internet real estate in the United States, housing servers for Facebook, Amazon Web Services, Google, Microsoft, Rackspace and about 2,900 other technology companies.
These days the town of Ashburn in Loudoun County is the epicenter of the data center building boom, with active projects under development by most of the largest cloud builders. Loudoun County is home to more than 60 data centers, with 6 million square feet of data center space and another 3 million square feet under development. Nearby Prince William County says it hosts an additional 2 million square feet of data centers.
A recent report from Jones Lang LaSalle said Northern Virginia is seeing more new space deployed than any other market in the country, absorbing more than 110 megawatts of capacity over the past two years. 451 Research projects that Northern Virginia will overtake the New York metro area as the nation’s largest data center market for 2015.
Free Resource from Data Center Frontier White Paper Library
Location, Location, Location
Why is Ashburn, which lies about 30 miles west of Washington, such an important site? It was home to a former UUNet facility that was a key hub in MAE-East, the Internet’s first major interconnection point. Equinix built its first data center in Ashburn in 1998, providing a “carrier-neutral” facility where companies could gain access to Internet backbones operated by UUNet and AT&T.
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 facilities.
As Equinix has grown, the land around its Ashburn campus has become some of the most valuable and strategic data center real estate in the world. The industry’s major players have kept a watchful eye over the available land parcels in Ashburn,
That includes Equinix. The company has run out of room on its original campus and on Oct. 15 broke ground on a 40 acre parcel that will be home to five new data centers. Equinix expects to invest at least $1 billion on its North Ashburn campus over the next 10 years.
Digital Locks Down Room for Growth
Digital Realty, which operates more than 24 million square feet of data center space across its global platform, has also been preparing for a long-term presence in Ashburn. Last Thursday CEO Stein confirmed that the company has acquired more land near its existing Ashburn campus.
“This is one of the few remaining greenfield sites suitable for data center development in Loudoun County,” said Stein. “It will support the development of approximately 2 million square feet in the build-out of roughly 150 megawatts and will facilitate our customers’ growth for the next several years upon completion of our existing Ashburn campus.”[clickToTweet tweet=”“Data center demand is stronger today than it’s ever been.’ – Digital Realty CEO Bill Stein. ” quote=”“Data center demand is stronger today than it’s ever been.’ – Digital Realty CEO Bill Stein. “]
The company’s Digital Ashburn campus already houses 1.5 million square feet of data center space in eight data center buildings. A ninth data center is under construction, and once that’s filled there’s room for a 10th building. Digital Realty has invested $950 million in the first eight facilities, and will spend another $300 million to complete the final two buildings.
Digital Realty has been cautious about expansion under the leadership of Stein, who became CEO last year. But after a year spent optimizing its portfolio and acquiring Telx to push into the colocation and interconnection market, Digital says it is time to shift back into building mode.
“New supply in Northern Virginia ticked up during the third quarter, but we remain very comfortable with the leasing velocity in that market,” said Stein. “We continue to closely match our new starts with customer demand and we continue to enjoy great success at healthy returns in Northern Virginia.”
A Horizon Filled With Data Centers
In the northern Virginia market, you can look in almost any direction and see data center expansion. Here’s a look at the expansion activity:
- RagingWire Data Centers, which entered the Ashburn market in 2011, is building its second data center (the 140,000 square foot VA2) and has acquired 78 acres of land for future expansion, with plans for up to 2 million square feet of additional data center capacity.
- DuPont Fabros owns land adjacent to its existing campus where it plans to build ACC8. Since the parcel can support just 10 megawatts of capacity (compared to to the massive 40-megawatt ACC7) DFT recently signed a contract on 34 acres of land to serve as the future home of ACC9. “Based upon demand and what we’re seeing in the market, that’s when we will announce ACC9,” said Eldredge. “We’re not there yet, but we can move very fast once that closes.”
- Sabey Data Centers is the wild card in Ashburn. The company, which operates a large footprint in Washington State and a project in New York, owns 38 acres of land in Ashburn that it has been sitting on since 2011, when it announced plans for a 490,000 square foot campus with three data center buildings. The land is prepped for construction and the on-site substation is energized. Sabey is giving tours, and seeking an anchor tenant to kick off the project.
- CyrusOne this month completed the addition of 30,000 square feet of colo space and 6 megawatts of power capacity at its facility in Sterling, just over the town line from Ashburn. “We continue to see solid demand in this market,” said Laramie Dorris, director, data center design and construction at CyrusOne, which now has 75,000 SF and 12 megawatts of critical load in Sterling. The company’s long-term plans for th 14-acre campus includes multiple buildings with up to 400,000 square feet of data center space and 48 megawatts of critical load.
- Amazon Web Services is in the process of completing the third building on its newest campus in Ashburn (it’s where a fire occurred earlier this year), and also has plans to build a major data center in Haymarket in Prince William County. The company reportedly has 24 data centers in towns across northern Virginia.
That seems like an awful lot of supply. But in a market driven by large customers who can gobble up 6 to 10 megawatts in a single transaction,
“We believe Northern Virginia is an undersupplied market and there’s a lot of opportunity for us in the market,” said Eldgredge, the CEO at DFT. “Pricing is stable. It is competitive, but we feel we have a very strong product in the market and a leadership position, and believe that supply and demand dynamics are in our favor. We’re seeing a lot of demand for our product in the marketplace and we’re very optimistic about our future.”