Virginia is for Data Centers (Still)

Parts of northern Virginia are running short of power for data center projects, but state officials say there are still plenty of quality development sites. Companies considering Virginia for data center projects may want to look beyond the most crowded data center clusters, according to Michael MacNeilly, the Project Manager for Business Development at the Virginia Economic Development Partnership.

On Wednesday SoftLayer opened a new data center in Chantilly, and began installing servers in space operated by Internap. It's the latest new facility in northern Virginia, which is rich in connectivity and experiencing strong demand for data center space. Equinix (EQIX), DuPont Fabros (DFT), Digital Realty Trust (DLR), and Power Loft all have expanded with major data center projects in the counties surrounding Washington in northern Virginia.

MacNeilly said economic development officials have identified about 85 sites across Virginia that could support data center development, including a growing number of locations in the southern half of the state. "There's more to Virginia than just northern Virginia," MacNeilly said last month at Data Center World. "In certain areas, power is an issue. What we tried to do is to be proactive, so we looked at sites statewide that might support a data center."

Dominion Virginia Power says northern Virginia's peak electricity demand has jumped 76 percent since 1990, a trend that is expected to continue as more data center projects come online in the next several years. Dominion has proposed a new 500 kilovolt power line through a 65-mile stretch of rural northern Virginia, but the $243 million project has encountered resistance.

In recent years projects have started to shift further south, as providers targeting the market for ultre-secure government data center space look to build outside the "blast radius" and flight paths from Dulles and Reagan National airports. "With government agencies or you want to be away from the capital" for disaster recovery purposes, said MacNeilly.

Two examples are Terremark (TMRK), which is building up to 250,000 square feet of data center space in Culpeper, and a Carpathia Hosting project in Halifax County that may eventually add 300,000 square feet of secure data center space. Southern Virginia also has attracted at least one major data center for a government agency.

Government data centers will be a key focus of two upcoming conferences, the DataCenterDynamics Washington event on May 13 and the Government Data Centers Best Practices event on June 12-13.

A key element of northern Virginia's appeal is its history as an fiber-rich Internet connectivity hub. The growth of the Mid-Atlantic Broadband Cooperative (MBC) has boosted connectivity in southern Virginia, using money from the state's settlement with tobacco companies to build a faster backbone to support more data centers. MBC is a not-for-profit cooperative created in 2003 to provide affordable broadband to Virginia residents. "(MBC) has been a great asset to develop (data centers) in southwest Virginia," said MacNeilly.

Many states have offered tax incentives to attract large data center projects, including North Carolina, which landed a major Google data center. MacNeilly acknowledges that the data center landscape has become more competitive, from an economic development standpoint, but says Virginia has a key advantage for data center site location.

"As in the case of all real estate, it's about location," said MacNeilly. "And we believe no amount of incentives can make up for location."