Google is planning a major data center capacity expansion in Northern Virginia, the largest and by many accounts most important data center market in North America – home to the largest cluster of Amazon cloud data centers as well as other top cloud providers’ massive computing facilities.
The Alphabet subsidiary recently bought two large land parcels in Loudoun County (outside of the most server farm-heavy area referred to as Data Center Alley). Google paid tens of millions of dollars less for the land than it likely would have, had it chosen to build in the Alley, where unprecedented demand for data center capacity in recent years has driven supply of suitable real estate down and land prices up.
“We’ve been the most important data center market over the last eight years now, so there definitely has been a lot of competition for land and continues to be,” Buddy Rizer, executive director of the county’s economic development department, said in an interview with Data Center Knowledge. “We still have some really great opportunities, but certainly you can’t have this kind of demand for eight years and not have some sort of push on supply.”
There is currently more than 10 million square feet of data center space in Loudoun County, he said, with 3.5 million more under development. The region’s data center industry has grown by close to 200 percent since 2000, according to Rizer.
Google bought a 91-acre parcel for $58 million (about $640,000 per acre) and a 57-acre one for $31 million ($540,000 per acre), according to the Loudoun Times-Mirror, the local news outlet that first reported the land deal. Those are much lower prices than some of the recent land deals in Ashburn, the heart of Data Center Alley, where Equinix for example paid $1 million per acre in a land purchase next to its original campus earlier this year.
Recent land grabs in Ashburn by Vantage Data Centers and QTS Realty Trust involved similar price premiums. QTS paid $36 million for a 24-acre property in Ashburn this year, or $1.5 million per acre, and $17 million for a 24-acre one ($700,000 per acre).
Data center developers have been rushing to enter the Northern Virginia market or bulk up their existing land banks there to take advantage of the booming demand for data center space in the region. The demand is driven primarily by hyper-scale cloud platform operators, such as Amazon, Microsoft, and Google, and by smaller platforms that also require substantial amounts of data center capacity, such as Uber and Oracle, in the market valued primarily for the extraordinarily large amount of network infrastructure companies can access there.
Amazon Web Services currently has developer Corporate Office Properties Trust, or COPT, building close to half a million square feet of space for its cloud data centers in Northern Virginia. That’s in addition to 1.9 million square feet of operational data center space the cloud giant already leases from COPT in the region. In a recent regulatory filing, the developer said it is planning another 11 buildings there (2 million square feet total), expecting to lease them all to AWS.
While Google has had a data center in Northern Virginia for some time, the first three facilities that host its enterprise cloud services there only came online this past May. Its recent land purchase indicates that the company expects demand for hosting customer applications and data in the region to grow quickly. It plans to start construction on the 91-acre site in the Arcola Center area south of Data Center Alley next year, according to the Times-Mirror. Rizer confirmed that the details reported by the news outlet were accurate. It’s unclear when the company plans to start construction on the second site, located within Stonewall Business Park in Leesburg.
Google spokeswoman Charlotte Smith said the land deals were about ensuring the company had expansion options. “We are working through site plans and don’t have details to disclose at this time, but we want to ensure that we have options to continue to expand our data center presence when our business demands it,” she said via email.
Google buying land outside of Data Center Alley is likely a sign of things to come. A real estate expert who specializes in data center land in Northern Virginia told Data Center Knowledge earlier this year that companies looking to enter or expand in the market would be wise to look at places like Arcola and Western Ashburn, where land prices are still reasonably low.
According to Rizer, even three years ago, the parcels Google bought probably wouldn’t be considered for data center use. “This is just the further expansion of what I think is the world’s most important cloud market,” he said.
All data center real estate players in Virginia are looking at alternative locations, Michael Darragh, a senior VP on Digital Realty Trust’s acquisitions team, told Data Center Knowledge in an earlier interview. Places outside Loudoun County, such as Richmond (future home to a Facebook data center) and Manassas, are getting a lot of attention as well, he said.
Today, “there’s still some dry powder in Loudoun County,” so there’s no urgent need to plant a flag somewhere else, Darragh said. “But we’re all looking.”