Networking / Colocation / Data Center
How Ashburn, VA became the Colocation Mecca known as Data Center Alley
What is Data Center Alley?
A Brief History
What’s so special about Data Center Alley, anyways?
Power: A significant amount of energy is required to keep your network running and maintain an optimal climate for the IT equipment. The typical cost per megawatt paid by data centers in Data Center Alley is 28% lower than national average, due to access to Dominion Virginia Power as well as the Potomac River for server cooling needs.
Fiber: Data Center Alley has access to countless redundant fiber optic loops (terrestrial in NoVA and subsea in Virginia Beach) and cross connect opportunities that provide access to businesses and ISPs throughout the region. A robust fiber network offers compounding network effects due to improved connectivity, redundancy, and disaster recovery options.
Supportive Government: The State of Virginia was a first mover in pro-data center legislation and policy; when VA enacted its first data center tax exemption in 2009, only seven other states offered similar incentives, while today over 30 states offer these incentives. Such incentives include:
A 6% sales and use tax exemption (on servers, generators, chillers and server-related equipment) and tax deductibility of recruitment and training cost for new job creation
A fast track program for data center construction permitting
Competent Workforce: Data Center Alley benefits from a talented workforce due to its proximity to Washington D.C. and the highly educated population of the region. In fact, over 60.0% of Loudoun county’s population has a bachelor’s degree vs. a national average of 36.0%. Additionally, Northern Virginia was ranked #2 for the top technology talent markets in a 2020 CBRE survey.
Space to Build: While the Data Center Alley real estate market has been hot, commercial land available for development still exists in the area.
Safe Location: Data Center Alley is in a location that does not experience adverse weather or natural disasters, providing a reliable ecosystem for data centers.
Resources: NoVA is healthily populated with data center equipment and other resource providers.
Recent Trends in Data Center Alley
Continued Shift to Hybrid Connectivity Models: Enterprises continue to shift from on-premise data centers to colocation and outsourced public cloud providers, driving demand for Data Center Alley. This trend accelerated in 2020 as companies worked to fulfil the IT requirements of a remote workforce. Gartner estimates that by 2025, 85% of infrastructure strategies will integrate on-premises, colocation, cloud and edge delivery options, versus just 20% in 2020.
Hyperscalers: Hyperscalers such as Amazon Web Services and Microsoft Azure have led the charge in 2020 data center demand, as they require more capacity to service the widespread shift to online activity. For example, Amazon spent $73 million on 100 acres in Virginia in January 2020 and later announced plans to fast track construction on three more data centers as well.
Constrained Supply Augmented by New Construction: COVID-19 driven demand in 2020 absorbed the supply of data center space in NoVA, resulting in a construction boom.
Robust M&A and Investment Activity: Data center M&A in 2020 was record setting and Data Center Alley benefitted from the increased investor interest. Investors pay $2.0 million+ per acre in Data Center Alley due to its supreme data center ecosystem and connectivity opportunities.
Continued Demand for Green Energy: Data Center Alley customers and a newly democratic majority government in Virginia continued to push for green data center energy in 2020. Dominion Energy has outlined several initiatives to help meet the demand.
Pre-Leasing: To avoid overbuilding, many data center providers pre-lease data center space that is under construction. Many existing customers have a right-of-first-offer (ROFO) on the space, making it harder for new customers to enter an ecosystem.
What’s next for Data Center Alley?
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