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Location and Business Environment Drive Growth of NoVa Data Center Market


Digital Realty’s P building in Ashburn is among the multi-tenant data centers hosting different types of workloads. (Photo: Digital Realty)

The Northern Virginia (NoVa) data center market is the largest in the world and its rapid growth has transformed the local real estate market. This launches our series of special reports on the Northern Virginia Data Center Market.

Get the full report.

Northern Virginia is the epicenter of digital infrastructure in North America and the preferred data center location for hyperscale operators seeking capacity to power cloud computing platforms and social networks.

The region is one of the greatest success stories of the internet economy, with the rapid growth of the data center industry transforming real estate markets and the local tax base.

The Northern Virginia data center market spans several cities in Loudoun, Prince William and Fairfax counties, and shows signs of expanding into adjacent counties. At the heart of the region’s geography and success is Ashburn, known as Data Center Alley for its concentration of critical facilities.

Ashburn sits atop the densest fiber optic network intersection in the world, making it an ideal location for storing and distributing data. It is unique in its connectivity and its data centers lay the physical foundations of the digital economy.

Northern Virginia continues to be the largest market for data center space in the United States and is home to 11.9 million square feet (SF) of ordered multi-tenant data center space, representing 1 920 megawatts (MW) of ordered power, according to market research by data centerHawk. The demand for space is very strong, as evidenced by the vacancy rate of only 1.28% in the region.

Northern Virginia has seen unprecedented levels of data center leasing, record valuations for land in Data Center Alley and an increase in land banks as developers seek to lock in space for future expansion in this region , which is also of strategic importance for corporate clients. as hyperscale players. NoVa continues to see demand for traditional colocation space for enterprises, content companies, IT integrators and government agencies.

The latest market growth figures are extraordinary, even by historical standards. Here are some data points:

According to datacenterHawk, 237 MW of ordered data center capacity was either absorbed or pre-leased to NoVa in the fourth quarter of 2021, easily surpassing the industry record of 115 MW for a full year – which was set in 2017 in Northern Virginia.

The volume of data center capacity in the planning phase in Northern Virginia reached 4,022 MW, or more than 4 gigawatts (GW). This is partly due to new players entering the market, but also includes major expansions by experienced players.

Northern Virginia

The Growing Northern Virginia Market

Northern Virginia is the largest data center market in the world. This extremely mature and well-connected area has its roots in the US government’s experiments with fiber optic wide area networks in the late 1960s. enterprise-friendly make NoVa the premier marketplace for data centers serving the region’s largest public and private enterprises.

More than 70 companies with annual revenues exceeding $500 million are headquartered in Virginia, with eight of Virginia’s nineteen Fortune 500 companies headquartered in the NoVa area.

NoVa is the home of the cloud for a number of the following reasons:

  1. Competitive colocation/cloud environment – Northern Virginia has the largest presence of colocation and cloud providers in the United States, creating a very competitive environment.
  2. Strategic location – The Northern Virginia market offers a strategic and profitable market for companies that need their data center in the Northeastern United States
  3. Relatively free from natural disasters – Other than occasional high winds and rain from hurricane remnants, the Northern Virginia market is generally very safe.
  4. Reasonable feed cost – Northern Virginia electricity costs are competitive among major colocation markets and are reasonable considering the total cost of occupancy for long-term needs.
  5. Business climate – Despite some economic challenges in Virginia over the past few years, businesses in the region continue to grow, creating data center requirements for the market.

Virginia’s economy is diverse, with both a strong manufacturing base (producing everything from flooring to rocket engines) and an information services sector. More than 70 companies with annual revenues exceeding $500 million are headquartered in Virginia, with eight of Virginia’s nineteen Fortune 500 companies headquartered in the Northern Virginia area. Since 2018, nearly $2 billion has been spent on land purchases for data center development in Northern Virginia.

While downtown Washington, DC has several smaller data centers, the bulk of data center investment occurs outside of downtown. Concentrations of colocation, cloud and enterprise data centers are located in several cities in the northwest corner of the market, including Ashburn, Sterling and Reston, VA.

The Ashburn area (a suburb north of Dulles Airport so dense it is commonly referred to as Data Center Alley) is dominated by a number of large data center providers. It is home to several large campuses owned and operated by Digital Realty, which is the largest provider in the market and positioned for long-term growth in the region. Digital Realty has developed two massive data center campuses, and in 2017 it acquired a third major campus with its acquisition of DuPont Fabros Technology.

Equinix is ​​also a key player in the Northern Virginia data center ecosystem, operating a key regional connectivity hub at its Data Center Alley campus. Equinix operates 14 data centers in the region and has secured land in the region to continue to expand.

About a mile to the southeast is Sterling, an area with a growing number of data center providers. Digital Realty, CyrusOne, Cyxtera and Stack Infrastructure are well positioned to compete in this space in the immediate future. Reston also continues to grow, with significant investments from CoreSite, Digital Realty and Equinix.

The strong demand for data center space in Northern Virginia, along with the dwindling supply of development plots, has led to the emergence of several regional submarkets beyond the heart of Data Center Alley in Ashburn. These include:

  • The Dulles Corridor of Cloudsa – The area surrounding Dulles Airport is the new frontier for data center development, housing campuses for Amazon Web Services, Google and Microsoft in Arcola. Digital Realty is planning its largest campus here, and AWS has aggressively acquired sites on all sides of Dulles Airport.
  • The Leesburg Cluster – A Google data center is the largest facility here, but it has a business in a Compass Datacenters campus. Microsoft and TA Realty are planning major projects in the region.
  • Prince William County – The Manassas area is becoming a focal point for developers looking for large properties for long-term growth. AWS operates multiple campuses in the region, and CloudHQ, Iron Mountain, QTS, STACK Infrastructure all have campuses. Corscale and Yondr Group are new entries with plans for large campuses near Manassas, while a group of owners have banded together to market the Prince William Digital Gateway, a controversial data center district that could support up to 21 million square feet of new data center development.

While requirements from government agencies have increased the demand for data centers in NoVa, the majority of the market is made up of other industries that find the market attractive. Aerospace, financial, managed hosting, technology and telecommunications companies have all claimed NoVa’s data centers. Colocation requirements in the NoVa market are generally greater than in most markets. This is due to the nature of the needs, as well as availability and competitive pricing in the market.

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 will look at market history and major market updates.