Ashburn, a city in Virginia’s Loudoun County about 34 miles from Washington D.C., is widely known as the Data Center Capital of the World. Loudoun County has similar renown and is called “The Center of the Internet” and “Data Center Alley.” Online data isn’t stored in a “cloud,” of course. A physical location is required for the networked computer servers in a data center. The Internet became available to the public in 1991, and by the late 1990s, Ashburn and its surrounding region of Northern Virginia was identified as an ideal location for data centers and storage of massive amounts of data. That particular spot on the map is where an estimated 70 percent of the planet’s Internet traffic flows each and every day.
Grasping the Scope of Ashburn’s Data Center Market
The data center market in and around Ashburn, in Northern Virginia, became, not long ago, the first in the world to surpass 1 gigawatt of overall data center capacity. London is a distant second, with only about half the capacity, at 559 megawatts (MWs) of inventory.
Data Center Alley shows no signs of slowing down, with 557 MW of data center storage either under construction or in the planning stages. No other markets across the seven continents approach the rate at which the Ashburn area is increasing in new data storage projects. This begs the questions: Why is Ashburn the site of such data storage dominance?
Why Ashburn?
Several purely practical factors considered together pinpointed Ashburn as the ideal place for Internet and fiber network expansion.
Cost of Land in Ashburn
First, the land was available at reasonable prices. It was practically all rural back then. But now? Due to the favorability of the region for data center development, acres are currently being sold like hotcakes for $1 million or more.
Cost of Electricity
In Ashburn, the cost of electricity is 20% lower than the natural average. This is significant because keeping servers cool is the greatest expense related to data centers, and the cost is tremendous. Almost 40% of the electricity required to keep the lights on in the United Kingdom is the amount used to provide electricity to data centers across the world. Another way to put it is that 3% of the total electricity used in the world recently went for data centers. The amount of electricity required just to power the growing number of centers increases exponentially each year.
By the late 1990s, this section of North Virginia was viewed as the perfect place for the expansion of the internet and fiber networks. The land was reasonably priced, the electricity cost was low, and it was near a skilled and educated population. 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.
NOVA is perfect for cloud computing because its local economy is already stable from previous development projects, making major utility price hikes unlikely in the near future. Large sources of cheap power are available, and local construction companies have been tackling data center projects for nearly thirty years, making them as close to experts in the field as you’re going to find. Northern Virginia boasts a technically skilled workforce. The huge presence of government technology contracting companies has also contributed to this pool of talented workers. Data center operators are continuing their buildouts at a rapid pace. Increasing investments in building new and upgrading existing data centers that support the provision of cloud services is among the main drivers of growth.
The final element making Northern Virginia attractive for data centers is its power. Dominion Energy is the main power utility provider to the region. It provides about 1 Gigawatt of reliable, low cost energy throughout North Virginia. This availability of stable power in combination with the fiber infrastructure and government support is essential to the ever-expanding data center space. In addition to that, its electricity rate 20% below the national average made it the perfect place to develop technology and hosting infrastructure.
Improve
This part of Northern Virginia (NOVA) was perfect for the first expansion of Internet and fiber investments during the early 1990s. The land – still almost all rural back then – was reasonably priced and close to the nation’s capital, making it a prime location for the development of what is now called the Dulles Technology Corridor, sometimes referred to as the “Silicon Valley of the East.”
When they created their campus of data centers, it formed the foundation for interconnectivity with massive potential. Each new connection contributed to the wider ecosystem, creating a compounding effect. Other companies such as Digital Realty and Dupont Fabros (now owned by Digital Realty) began to build outward from the campus to benefit from the powerful digital ecosystem. The demand for space in the Data Center Alley began to rise as more organizations realized the value of tapping into such a highly interconnected infrastructure leading to the development of more facilities. The region evolved at such a phenomenal rate that, by 1997, half of the world’s traffic was already flowing through it.
Ashburn Traffic
Every major player in the industry is represented in Loudoun, from Amazon Web Services (NASDAQ: AMZN), Google (NASDAQ: GOOG) and Microsoft Corp. (NASDAQ: MSFT) to CyrusOne (NASDAQ: CONE), Digital Realty Trust (NYSE: DLR) and Equinix (NASDAQ: EQIX).
According to Data Center Frontier, NOVA is host to four of the top 10 cloud campuses in the US. These are data centers featuring raised-floor environments. No other market in the world has more than one of the Top 10. AOL made its home there, followed by Verizon, Telos, Orbital Sciences, and Paxfire. Then came the mega-giants, Amazon and Google and Facebook; the companies that have turned data from a science into an art.
In about two decades, the industry evolved from a retail colocation market to the world’s data center capital. Everything from wholesale data suites to custom built cloud facilities are available in Ashburn. Today, technology powerhouses like Google, Microsoft, Facebook, Oracle and Amazon all have stakes in the Data Center Alley to support their rapidly growing cloud computing needs. Loudoun county alone hosts more than 60 data centers which service around 3000 tech companies. Today, up to 70 percent of the world’s internet traffic flows through these centers daily. important.
Loudoun County 2018 -- Now called “Data Center Alley,” Loudoun County is the subject of one of Internet’s most extreme statistics. According to Loudoun’s Department of Economic Development, as much as 70% of all Internet traffic in the world is routed through the county on a daily basis. That sort of number is difficult to quantify. As of June 2018, there were about 4 billion Internet users in the world, about 52% of the world’s population. There’s no way to really tell how much worldwide Internet traffic there is in a single second, let alone an entire day. Cisco places the number at around 700 terabytes per second (Tbps). Considering there are 86,400 seconds in a day, and the sheer amount of data flowing daily through Loudon County is truly mind-boggling.
The Local Government, Tax Cuts, and Incentives
This level of infrastructure development is also supported by the local government. The data center industry is recognized as a vital component of the modern economy, as it impacts every other major industry. Locally, it is a large contributor to employment and a major source of revenue for the state. In fact, Loudoun county has the highest median household income in the US, with nearby Fairfax county trailing closely behind.
The Virginia state government was able to recognize this potential and played a major role in the development of Data Center Alley. In 2014, the Data Center Zoning Ordinance was approved to allow the construction of new data centers in more districts and as long as they adhere to the design guidelines. With high demand for strategic positions on the map, multi-story data facilities are encouraged to maximize space. Loudoun county also began offering the Fast-Track Commercial Incentive Program. The initiative provides a dedicated project manager and gives data center projects priority on the development review list. It also facilitates tax exemptions for data centers that meet their criteria.
Looking Ahead
According to Buddy Rizer, the Executive Director for Economic Development in Loudoun County, there has not been a single day without construction on a new data facility since 2008. Loudon County continues to benefit marvelously from its position, raking in $110 million in annual tax revenue thanks to its large-scale business partners. With scalability a snap and plenty of land still available, the future continues to look bright for NOVA when it comes its reign as the data capital of the world.
Over the last dozen years, Rizer said, the commercial portion of Loudoun’s tax base has grown from 19 percent to 34 percent, largely due to data center growth. The real estate tax rate is down 20 cents per $100 of assessed value over the past six years, he said, and the county expects to receive about $250 million this year alone from data center-related taxes.
Northern Virginia is where the first commercial exchange was born called MAE-East (Metropolitan Area Exchange) by Metropolitan Fiber Systems (MFS) in Tysons Corner in 1992. Since then, several connectivity-centric companies have made a mark in the Northern Virginia landscape including UUNET, PSINet, AOL and Equinix, to name a few. Terrestrial fiber construction has continued perpetually; you constantly see fiber splice trucks, and road being dug up wherein new conduit systems and terrestrial fiber optic cables are being installed underneath the roads. We have seen the installation of 3,456 strand fiber cable installed in the Northern Virginia region. The region boasts some of the country’s most fiber dense roads as depicted in this image courtesy of NEFiber.
Subsea fiber cables from Europe and South America land in Virginia Beach and much of the internet traffic is then routed through Loudoun County's "Data Center Alley." Several experts at Bisnow's Data Center Investment Conference & Expo Wednesday said they foresee the cables pulling the data center market south.
Blog Image 3Until recently, in order for the international Internet traffic to leave the state of Virginia and reach its destination in other parts of the world, it had to be first sent to New York, New Jersey or Florida. This is because the “landing stations” where the subsea fiber systems terminate existed only in these three states in the Eastern Seaboard. This changed in 2017 as Virginia got its first subsea cable, MAREA, connecting Bilbao, Spain to Virginia Beach. The second subsea cable coming to Virginia, BRUSA, is expected to be completed later this year connecting the state of Virginia directly to San Juan, Puerto Rico, and Fortaleza and Rio de Janeiro, Brazil. The direct international connections will further give the data center community in Virginia more connectivity options for low-latency fast connection to various international destinations. There are also several other subsea fiber projects under consideration for Virginia Beach.
In summary, Ashburn has attracted data center and connectivity providers from all over the country. Every major data center provider (retail or wholesale), every major cloud provider, every major terrestrial fiber connectivity provider is in Northern Virginia, and now subsea fiber operators are coming to the state of Virginia.
Trends
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).
