The COVID-19 pandemic is driving demand for more data centers in the world’s largest cloud cluster. Developers are racing to build new IT capacity in Northern Virginia to meet extraordinary demand for cloud computing resources due to the rapid societal shift to online services.
Since March 16, Loudoun County has received “fast track” applications for seven construction projects, representing nearly 3 million square feet of new data center space, according to Buddy Rizer, the Executive Director of Economic Development for Loudoun County.
“We’ve never been as busy as we are right now with the data center industry,” said Rizer, who has been managing growth in Loudoun’s “Data Center Alley” for 13 years. “It’s quite amazing.
“COVID has definitely accelerated development,” Rizer told Data Center Frontier. “This is all stuff that was in planning stages already, but COVID definitely has hurried all the timelines. Everyone’s seeing more demand for their services, and they are looking for more capacity to be ready for growth.”
The pandemic has been a defining moment for the cloud. The world has gone online as never before, as COVID-19 precautions have shut down businesses, schools and entertainment venues. The sudden shift to digital work has driven a 30 percent surge in Internet traffic, with some video conferencing services like Zoom seeing much larger increases in demand.
“I’ve been looking at traffic graphs for over 20 years now and I can’t recall seeing anything like this,” said Tom Leighton, CEO of Akamai, the largest Internet content delivery network.
More Servers, Filling Data Halls Faster
As companies add servers, they are filling their data centers faster, and scrambling to add new capacity. Much of that new demand is focused on Northern Virginia, the “home of the cloud” with more than 100 data centers and 10 million square feet of IT technical space.
Loudoun County has a Fast Track Program that provides priority reviews for economic development projects that have significant impact on the tax base, helping applicants navigate the permitting process. “We can save months off the time for permitting,” said Rizer.
The seven current Fast Track applicants include new data center projects by Aligned, Digital Realty, Equinix, QTS Data Centers, Sentinel Data Centers and several hyperscale operators.
The surge in new construction has been accompanied by an acceleration in leasing of available space, as well as a jump in activity in “land banking” – acquisition and preparation of land to support future data center projects.
The data center market saw a historic increase in leasing during the spring of 2020, when much of the U.S. economy was being negatively impacted by COVID-19 restrictions. North America had 238.6 megawatts (MW) of data center absorption in the second quarter, up more than 65 MW from the first quarter, according to research from datacenterHawk. “Northern Virginia was responsible for “a significant amount of the activity.” the report said.
Leading developers typically spend between $6 million and $8 million to deploy a megawatt of data center capacity, placing the construction spending impact of the quarter’s new leasing at between $1.4 billion and $1.9 billion, with about $400 to $520 million of that tied to stronger demand. An even larger economic impact will be felt as the tenants move in and begin installing tens of thousands of new servers, which represent a much larger capital investment than the buildings.
Power Usage Confirms Growth Trend
The migration of business activity from stores and offices into data centers was visible in data for electricity usage, said Stan Blackwell, Director of Strategic Partnerships at Dominion Energy, the primary utility serving Northern Virginia.
“For most industry segments, their (power) usage was down dramatically,” Blackwell said in a recent CAPRE webinar. “But that’s not true for data centers. We saw a spike, and it’s not slowed down. We’re a very, very large market for data centers and we saw north of a 10 percent increase (in power usage). It seems to be continuing to accelerate. Demand is just exploding and operators are just consuming more and more. They’re signing new leases, and they’re building new space.
“The question is: Do we have a new normal?” Blackwell said. “And is it ever going to slow down, or is it going to continue to expand? I don’t see it slowing down for the next three years.”
Data center developers are racing to secure land for future development to meet that demand. Recent county meetings have seen a handful of properties gain zoning updates to support data center development, including properties in the dense cloud cluster in Ashburn known as “Data Center Alley” as well as parcels of land in a new cloud corridor near Dulles Airport in Southern Loudoun.
“There’s some infill pieces in Data Center Alley,” said Rizer. “But apart from redevelopment, there’s not many sites left in Ashburn. I think that the area near Route 50, and Route 606 (near Dulles) has a lot of activity right now. There’s also some strong out activity in the area going out towards Leesburg.”
The development near Leesburg includes a new project by Compass Datacenters, as well as cloud campuses for Google and Microsoft.
With active leasing and all that construction in the pipeline, Rizer says Northern Virginia may approach its record absorption of 270 megawatts in 2018 – despite the pandemic.
“There’s a shot that this will be our biggest year yet,” said Rizer. “Data center activity was down some last year, as demand caught up with supply. Everyone’s trying to work through the pandemic and keep things moving steadily ahead. We haven’t missed any deadlines, and I know that a lot of places have shut down and aren’t doing site reviews. We’ve been hearing that from our data center companies trying to build in other places.”
Rizer says the county has worked closely with its pandemic task force and local construction firms to keep data center projects moving ahead.
“We’ve prioritized the data centers a little more right now because we know how critical they are,” said Rizer. “It is just amazing the way that the (data center industry) has enabled us to continue to do what we do – all of us, at every level of business – and the way that we’ve kept education, public safety and all the webinars going, The continuity business has never been more important, and our data centers have really shown their importance during this time.”