By Kari Williams
From the January/February 2024 Issue
Data centers continued to grow in 2023, despite fears of a “complete halt” in expansion due to the economy, according to the “2023 Global Data Center Market Comparison” report from Cushman & Wakefield.
In North America, Northern Virginia and Portland, OR tied at No. 1, followed by a three-way tie at No. 3 between Atlanta, Chicago, and the San Francisco Bay Area, the report found.
“There has been growing interest in secondary markets such as Portland, Phoenix, Columbus, [and] Canadian markets among many others as operators seek larger sites with affordable power,” the report stated. “There is still plenty of momentum in more established markets, such as Northern Virginia, Silicon Valley, Chicago, Dallas, and Atlanta, as eyes are turning toward untapped submarkets where land and power may be more available.”
Market conditions will “remain tight through 2024,” according to JLL’s “2023 North America Data Center Report.”
“The first half of 2023 witnessed robust growth in the data center market; however, most major and secondary markets are struggling with a supply and demand imbalance, leading to a shortage of colocation space and rising pricing,” the JLL report stated. “Secondary markets are expected to support the overflow from the constrained primary markets. Most of the supply expected to be delivered in the latter half of 2023 and 2024 has been preleased or is under exclusivity, resulting in limited options for users.”
Data center demand also has caught the attention of various investors, according to “Investing in the rising data center economy,” a 2023 report from McKinsey & Co.
“In the U.S. market alone, demand—measured by power consumption to reflect the number of servers a data center can house—is expected to reach 35 gigawatts (GW) by 2030, up from 17 GW in 2022,” the authors wrote.
Similarly, CBRE’s “North America Data Center Trends H1 2023” market analysis found that “strong demand and developer appetite” has spurred construction with AI “driving demand across most major markets.”
“However, a lack of readily available power and extended lead times for key pieces of electrical infrastructure are delaying construction timelines,” the analysis stated.
Virginia: The Data Center Capital Of The World
Of all the parties that can lay claim to the internet, Virginia might have the strongest case: The Commonwealth hosts the largest data center market in the world.
Northern Virginia alone is home to more than 35% of all known hyperscale data centers worldwide. Data center companies choose Virginia because of its abundant, affordable electric power and rapidly expanding renewable power options, its business-friendly environment—including state and local incentives for the data center industry—and educational initiatives training the top tech workforce in the United States.
Major tech companies continue to choose Virginia for their data center needs, strengthening the Commonwealth’s position as the data center capital of the world. In January, Amazon Web Services (AWS) announced plans to invest $35 billion by 2040 to establish multiple data center campuses across the Commonwealth. This represents the largest capital investment in Virginia’s history and will create at least 1,000 jobs.
“Virginia is a world leader in innovation and cloud computing thanks to its investment in a robust, highly skilled workforce and emphasis on long-term public and private partnerships,” said Roger Wehner, AWS Director of Economic Development.
In 2010, the General Assembly significantly expanded the Commonwealth’s data center sales and use tax exemption on computer equipment. This allows data center companies to receive exemptions for sales and use taxes on equipment and software if they make a more than $150 million capital investment and create 50 new jobs paying at least 150% of the average prevailing wage. Many localities offer reduced personal property taxes on data center computers and related equipment.
Three transoceanic fiber connection cables land onshore in Virginia Beach, providing some of the fastest data transmission in the world in the densely populated Hampton Roads and Richmond regions. This robust infrastructure has attracted major data center investments from companies like Bank of America and Meta. The planned South Atlantic Express cable, which will land in Virginia Beach, will enhance what’s already the largest interconnection ecosystem in North America.
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2023 Deals Of The YearVirginia’s top-notch tech workforce provides another draw for data center operators. More than 13,500 Virginians work in the data processing and hosting industry, and the booming sector supports more than 45,000 direct, indirect, and induced jobs.
Tech giants like Amazon and Microsoft are both beneficiaries and partners in Virginia’s renewable energy efforts. Amazon is in the process of adding an additional 1,430 megawatts (MW) of solar power across the Commonwealth, while Microsoft and Meta have also invested in large-scale solar projects in Virginia. Dominion Energy, Inc., plans to generate more than 16,000MW of solar energy in Virginia by the end of 2035, and its Coastal Virginia Offshore Wind project is the largest offshore wind project under development in the United States.
Virginia offers AWS, Meta, Microsoft, and other data center operators the total package—a favorable business climate, infrastructure with room to grow, access to renewable energy, and a talented, sustainable pool of employees to keep the data flowing for years to come.
For more information, visit www.vedp.org.
