Northern Virginia: Data Center Central

With all the talk of technology transforming the Northern Virginia economy, it nearly went unnoticed last year when Northern Virginia surpassed the New York region and Silicon Valley as the largest market in the United States for data centers. In its 2015 report, “The Economic and Fiscal Contribution that Data Centers Make to Virginia,” the Northern Virginia Technology Council concludes that this makes the area a key player in the world’s technology economy. 

Northern Virginia is currently home to more than 30 percent of the world’s data centers, with major clients including the federal government, Verizon, AT&T, Microsoft, Google, Bank of America and Capital One, says Buddy Rizer, executive director of Loudoun County’s Department of Economic Development.

"The emergence of cloud computing and other new technologies have driven increased demand for data centers and affected the commercial real estate market throughout Northern Virginia."

The evolution of Northern Virginia’s dominance in data centers traces back to 1969….the prehistory of today’s technology… when the federal government began experiments in wide area fiber optic networking. That research ultimately led to Northern Virginia becoming a key intersection for communications systems and a hub in the national fiber network serving government and private enterprise. .

With the advent of the internet, Northern Virginia’s existence as a communication hub also led to its emergence as a key internet access point. An internet hub known as the Metropolitan Area Exchange East, located in Ashburn, is now the busiest hub in the world, with more than 70 percent of the entire world’s internet traffic flowing through it every day, according to Rizer.

Data centers quickly followed, Rizer said. What began as storage centers for racks of servers and networking equipment has evolved into massive buildings housing advanced computing equipment to provide full scale interconnectivity. The sophisticated technology must be maintained in a highly secure environment and requires enormous amounts of electricity to maintain an air conditioned environment for the heat producing equipment. 

The emergence of cloud computing and other new technologies have driven increased demand for data centers and affected the commercial real estate market throughout Northern Virginia. 

 Ashburn, and the area north of Dulles Airport, has emerged as “Data Center Alley,” the largest concentration of data centers in the world. According to Rizer, Loudoun County is now home to more than 70 data centers housing more than 3,000 technology companies.

Vacancy rates hover near zero. Developers can’t build data centers fast enough. “Construction is demand driven, not speculative,” Rizer noted. ”We see no end to the demand for the next five years,” he predicted. “By then, the county will be built out.”

With interest in developing stand-alone suburban office parks dwindling in recent years, data center developers are increasingly seeking expansion into areas such as the AOL campus in Loudoun County previously designed for office development. A question for developers, as well as county zoning authorities, is whether a “data center” falls under the definition of an “office” as used in the county zoning ordinances. Loudoun County has adopted a special zoning for data centers, to ensure that the new construction will be more closely aligned with the county’s vision, Rizer explained.

While their unique need for security, tremendous amounts of reliable electricity, and access to telecommunications infrastructure pose a location challenge, the economic impact on communities such as Ashburn make data centers attractive targets for economic development. “Data centers currently add more than $120 million in annual local tax revenues,” Rizer pointed out.

“Realtors® seeking to target their residential or commercial business plans to anticipated high growth markets with affluent demographics would do well to track current data center development, and planned expansions as demand continues to grow."

Fueling the area’s continued growth in the data center market are a number of key factors:
- the availability of low-cost, reliable electric service
- high quality telecommunications infrastructure
- relatively cheap land prices
- availability of skilled and ready workers
- Virginia’s favorable tax and business climate
- low risk from catastrophic natural disasters
- Virginia’s strategic mid-Atlantic location, which gives businesses located in this area access to the nation’s capital, as well as being one day’s drive away from 40 percent of the U.S. population. 
     
Broader deployment of fiber optic networks and other infrastructure has encouraged facilities to spread across other parts of Northern Virginia, into the Richmond area, and even to such rural areas as nearby Fauquier County. 
     
Beyond increased local tax revenues, another positive economic benefit has been its multiplier effect on job growth in the technology sector, according to the Virginia Economic Development Partnership. ”One of the County’s top priorities is developing a diverse local economy targeting other technology firms that are attracted to the area because of the data centers,” Rizer explained. Loudoun County is currently ranked third in the nation in new job growth, he added.
         
Realtors® seeking to target their residential or commercial business plans to anticipated high growth markets with affluent demographics would do well to track current data center development, and planned expansions as demand continues to grow.