Northern Virginia will overtake the New York metro as the biggest multi-tenant data center market in the country by the beginning of next year, according to 451 Research. The region, whose data center market is mostly concentrated in Loudoun County, is now nearly tied with the New York-New Jersey area in terms of size.
The two markets were roughly tied in terms of space at the end of last year too, but more active builds in Northern Virginia will push it ahead for the first time by the end of the year.
At the end of 2013, Northern Virginia had 3.22 million square feet of multi-tenant data center space while New York had 3.25 million square feet of space. Loudoun County estimates that the total market (both multi-tenant and enterprise) is 5.2 million square feet, and more than 3 million square feet more is in development.
Michael Levy, senior analyst at 451 Research, said supply will grow 14 percent year over year in Northern Virginia, while the New York metro market will grow by 11 percent. The market research firm isn't tracking nearly as many builds in the New York metro as it does in Loudoun.
"With a torrent of cloud service providers and media/content providers deploying significant workloads is Ashburn, the market is solidifying its position as the epicenter of the Internet,” Levy said. “Northern Virginia has grown to be one of the top colocation markets in the United States, and we believe that by early next year it will overtake NY/NJ as the largest US multi-tenant data center market in the U.S.”
Made for data centers
Northern Virginia, and especially Loudoun, were made for data centers, with abundant fiber, cheap and reliable power from Dominion Virginia and attractive tax incentive programs. Loudoun officials have seen how valuable data centers are to the local economy and have been supporting growth of the industry using tax breaks.
Connectivity is rich, as the very foundations of the Internet were formed in the region, with major companies like AOL and Equinix setting up shop in Northern Virginia in the 1990s.
As of the end of 2013, 451 Research said, there were 30 data center providers operating more than 75 data centers in Northern Virginia. New York had 52 active data center providers operating 92 data centers. The gap is quickly closing, however,
Some of the main multi-tenant players in Loudoun are Equinix, DuPont Fabros Technology, Digital Realty Trust and RagingWire. Equinix’s campus is a key location, with more than 10,000 cross connects, 900 networks and direct access to 90 percent of Internet routes.
How big is the Northern Virginia data center market? In any other region, the pipeline of capacity set to come online might be considered a glut. RagingWire just completed an expansion at its VA1 Ashburn facility, and DuPont Fabros is holding a ribbon-cutting ceremony for its ACC7 facility (also in Ashburn) today.
Still in the pipeline for the remainder of the year is new capacity by Latisys and CenturyLink.
Several large campuses are planned beyond 2014. CyrusOne broke ground in April, but doesn't appear to be pre-selling just yet. Equinix is also planning another 1 million square foot campus. RagingWire has secured capital for additional expansion.
Pricing remains stable despite high supply
Pricing remains very stable in the market, and Levy doesn’t see the new capacity have any major effect on it. “There will be very minor difference of marginal downward pressure temporarily,” he said. “We see a very sensitive balance between supply and demand. With the new capacity, supply and demand will be equal."
Pricing in the region never really dips below a certain level, Levy said. “What I’m seeing is that in Ashburn there’s definitely a price floor and it never goes below that,” he said.