Equinix Doubles Down in One of Internet's Most Important Locations

Equinix founders choosing in 1998 to build the company’s first data center in Ashburn, Virginia, may have been the best site-selection decision a data center company has ever made. Today, 17 years and half a million square feet of colocation space in the region later, Equinix is breaking ground on a brand new Ashburn campus that has the potential to grow to 1 million square feet of gross building space – a data center build-out that would cost $1 billion by the company’s estimate.

To say that Equinix founders chose Ashburn as the place to build their first data center is not entirely accurate. Rather, circumstances dictated that they build it there. Northern Virginia, the patch of American suburbia stretching west and south of Washington, DC, was home to some of the earliest facilities where carriers interconnected networks and provided access to the internet. The distributed internet exchange, MAE-East, was what brought Equinix to the region, kicking off the development of one of the world’s biggest data center markets.

Keystone Moment in Internet’s History

The company’s founders won the contract to build a facility that would house a network peering point near one of the MAE-East locations that would not be controlled by Metropolitan Fiber Systems. MFS built MAE-East and later received blessings of the National Science Foundation in the form of a grant to establish the exchange as one of the four original “Network Access Points” that would lead the transition in the early 90s from a publicly-funded internet infrastructure to one controlled largely by the public sector.

Carriers recognized that MAE-East, housed in five East Coast locations – three of them in Northern Virginia – had limited scalability and put out a request for proposals for a separate carrier-neutral building, where carriers would interconnect their networks and link to the long-haul internet backbones at MAE-East. The team behind Equinix won the contract to build that facility and formed the company around it.

Snowball Effect Drives Persistent Demand

Today, Equinix operates 10 data centers in Northern Virginia, along with the who’s who of the data center and cloud services industry. The largest data center cluster that hosts Amazon Web Services is located in the region; Facebook leases about 40 MW of capacity in Ashburn from DuPont Fabros Technology, the biggest wholesale data center landlord in the area. Digital Realty Trust, CoreSite, RagingWire, CyrusOne, and Sabey are just some of the major data center providers in Northern Virginia.

The region is one of the oldest and most important interconnection points on the global map of the internet, which has had the snowball effect of attracting more and more players in the internet ecosystem. Because of that, demand for data center capacity in towns like Ashburn, Reston, Arlington, and Sterling has rarely slowed.

“The demand is every bit as strong as it has been, if not even getting stronger with increased enterprise cloud adoption,” Howard Horowitz, global head of real estate at Equinix, said. “It is still one of our top markets.”

The company has been adding a new data center in Northern Virginia every 18 to 24 months since it built its first facility there, he said, “and I don’t anticipate that changing.”

Its expansion has been far from incremental. DC1, which was about 40,000 square feet, was followed by the 150,000-square-foot DC2. Around the end of 2003 Equinix leased a building from DuPont Fabros next to its main campus to establish the 100,000-square-foot DC3, and so on.

The new campus will be called Ashburn North. It is less than one mile north of the original Equinix campus in town. The company’s plans call for five data center buildings on the 45-acre site, which it bought about two years ago.

Infrastructure work has already started, but Horwitz doesn’t anticipate Ashburn North to start offering capacity until at least 2017. Equinix has yet to build out the second phase at its DC11 building at Ashburn South, he said.

The Northern Virginia market has absorbed more than 30 MW of data center capacity so far this year, according to a recent report by the commercial real estate firm Jones Lang La Salle. It generated more demand than any other US market last year and is well on its way to doing the same in 2015, the JLL report said.

Examples of major deals in the region that closed this year were Facebook’s 7.4 MW lease with DuPont Fabros, Amazon’s 11.3 MW deal with Corporate Offices Property Trust, and InfoMart Data Centers stepping into the Northern Virginia market for the first time with a 5.4 MW build-out in a 180,000-square-foot building that used to house an AOL data center.

Internet’s Clustered Geography

That Equinix is committing to a whole new campus in Northern Virginia underscores the cluster-oriented profile of the internet’s physical footprint. Data centers tend to cluster around other data centers, and the more data centers there are in a cluster, the more likely it is to attract … well, more data centers. These cluster markets, such as Silicon Valley, Manhattan, or Dallas, oscillate between capacity glut and shortage periods, but that’s the nature of the business, which is a mix of real estate, where things move slow, and software services, where things move fast. Internet companies create demand quickly, but construction takes a lot of time and money.

In recent years, more data center capacity has been deployed in places far removed from those clusters. As internet users grow in number, and as businesses rely more and more on cloud services, there is a need for data center capacity in places where in the past companies could simply deliver their services over networks, without the need to store a lot of data locally.

But even with growth in those so-called “edge” data center markets, it’s hard to imagine a day when markets like Northern Virginia, where virtually every internet-oriented business that matters exchanges traffic, will lose their appeal.