Bigger Campuses Drive Cloud Growth in Northern Virginia

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Trends in Demand

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. The leading players are moving quickly to amass capacity for the clouds to come, resulting in huge deals for data center space under development.

The region has long been a strategic priority for Amazon Web Services, Facebook, and Microsoft, and is now becoming a focus of expansion for Google, Oracle, Salesforce, and Chinese cloud providers, as well as data-driven companies like Box, Dropbox, LinkedIn, and Uber.

This demand has redefined the scale of data center leasing. Prior to 2016, it was rare to see a wholesale data center lease exceeding 10MW of capacity. In 2016 a handful of tenants began seeking deals of 15 to 35MW.

Over the past several years, CloudHQ and Digital Realty have each built 96MW data centers in Data Center Alley, while Aligned’s newest data center tips the scales at 120MW.

As global players seek flexibility on timing of cloud availability zones across their footprint, some providers are offering the option of shifting leased capacity between markets.

Campuses are growing larger as well. Yondr Group intends to build 500MWs across two sites in Loudoun and Prince William Counties, while Digital Realty’s future Digital Dulles campus near the airport will support at least 7.4 million ft² of data centers.

Another facet of some recent deal structures is capacity portability for tenants whose relationship with a provider spans multiple geographic markets. As global players seek flexibility on timing of cloud availability zones across their footprint, some providers are offering the option of shifting leased capacity between markets. For some providers, capacity in the most strategic markets — especially Ashburn, Chicago and Santa Clara — can serve as incentives to craft larger deals and relationships.

Service providers say that with the rise of distributed computing, clients are increasingly willing to look beyond the traditional Uptime Institute tier-based model.

These trends in deal structure reflect the growing sophistication of data center users, as well as improved collaboration between tenants and landlords, who are working more closely together on matching space to needs.

Another area in which requirements have evolved is data center power design and the options for power delivery to the data hall. Service providers say that with the rise of distributed computing, clients are increasingly willing to look beyond the traditional Uptime Institute tier-based model. The traditional 2N power redundancy is yielding to N+1, or even N for some applications.

Here’s an overview of known significant transactions and demand trends in NoVa in 2020 and 2021:

• American Real Estate Partners: American Real Estate Partners acquired a parcel of land on Beaumeade Circle where they intend to construct a 265,000 ft² powered shell data center building. The parcel, acquired in 1Q 2021, was previously owned by Chirisa Capital, which intended to execute a similar project.
• Aligned Data Centers: In 1Q 2020, Aligned began construction on the second building at their Ashburn campus, with the first phase coming online in 2021. A portion of the data center’s total 60MW of power (expandable to 120MW) was pre-leased.
• DataBank: In 4Q 2021, DataBank has announced they have started construction on a 200,000 ft² data center which will be located adjacent to their current location in Ashburn. The initial build will produce 4MW of capacity when it comes online in Q1 2023, with the ability to scale up to 40MW of capacity fully built out.
• EdgeCore: In 4Q 2020, EdgeCore secured a pre-lease for their entire campus, prompting the company to seek out additional site acquisition opportunities.
• Equinix: In 4Q 2020, Equinix opened their DC21 data center on land acquired in 1Q 2017 off Beaumeade Circle. DC21 will offer approximately 15MW across space for 3,200 cabinets. The first phase included 3MW of commissioned power.
• Iron Mountain: In 2Q 2021, Iron Mountain purchased an 18-acre parcel adjacent to their current land, giving them room to expand the existing campus to over 100MW.
• NTT: NTT operates a large campus at the Gigabit Plaza, which will feature seven data centers, each offering 16 to 32MW of commissioned power. The first data center, VA3 opened in 1Q 2018 and is fully leased. Their current data center, VA4, has 32MW of commissioned power and was fully leased in 3Q 2020. The company is currently developing and pursuing pre-leases for their VA5 data center.
• QTS: In 2Q 2020, QTS began construction on another Ashburn site acquired in 3Q 2019. The site will hold two data centers and a total of 1.08 million ft². Construction on the first 42MW data center began in 2Q 2020, with 6MW of commissioned power in phase 1.
• Stack Infrastructure: In 1Q 2020, Stack Infrastructure announced their plan to construct a 4 million ft² campus in Manassas as a partnership with Peterson Companies. The campus is designed to offer up to 250MW of commissioned power. Stack is actively developing a build-to-suit data center for a single user on land they acquired from Peterson. They also acquired another 18-acre portion of the campus in 2Q 2021, where they can develop two 36MW data centers.
• Vantage Data Centers: In 2Q 2021, Vantage opened their VA12 facility with 24MW of commissioned power which has a significant portion pre-leased. The entire building will be 36MW when it is fully finished. Vantage is also actively pursuing additional sites for future development in NoVa.

Trends in Supply

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. However, when comparing to the report from 2Q 2018, there are significant changes in the market.

Driven by growth around data requirements, more cloud instances, and the need for critical infrastructure, there has been substantial measurable growth in the NoVA market. The commissioned powered metrics more than doubled, the commissioned space almost tripled, and the vacancy rate dropped to just over 1%.

Numerous data center providers have been building new facilities, acquiring more land, and mergers and acquisitions aim to further consolidate the data center and hyperscale market. Please see the Colocation Providers and Key Updates section for information on new builds, land acquisitions, and construction.

Download the full report, Northern Virginia Data Center Market, courtesy of Digital Realty, to learn more about this competitive data center market. In our next article, we’ll explore the NoVa business environment, including overviews of power, connectivity, tax incentives and hazard risks. Catch up on the previous article here and here.