by Brianna Crandall — November 20, 2015—Northern Virginia has surpassed the Tri-State New Jersey / New York region as the largest data center market in the U.S., with nearly 20 percent of the year-to-date market share in enterprise demand in 2015, according to global professional services firm JLL’s annual Data Center Outlook.
The region’s competitive utility rates, tax incentives, abundance of power and a robust fiber network that offers low latency compared to other Tier 1 markets – such as New York / New Jersey, Northern California, Chicago and Dallas – have made Northern Virginia the most attractive global data center market for enterprise users of all sizes.
In Northern Virginia, utility costs are very stable and have hovered around 6.0 cents per kilowatt-hour (kWh) for the last five years, compared to the national average of 7.4 kWh of the markets JLL surveyed. In addition, data center operators in Northern Virginia are aggressively delivering turn-key data center space with new progressive stable designs to meet enterprise user demand.
JLL Managing Director Allen Tucker noted:
We expect the 2015 data center market to be on par with or surpass 2014’s record levels and that Northern Virginia will also be the leading market again in 2016. Users can expect to see continued stable pricing and concessions into 2016 as operators continue to compete for the nation’s most robust enterprise demand, with power costs that will remain stable and predictable for several years.
Northern Virginia 2015 supply:
- Total inventory: 7.3 million square feet / 517.0 megawatts (MW)
- Total commissioned vacant: 167,000 sq. ft. / 34.7.0 MW
- Under construction: 223,000 sq. ft. / 38 MW
- Planned: 606,000 sq. ft. / 107.0 MW
According to the report, Northern Virginia is home to the nation’s largest data center REIT (real estate investment trust) operators (CoreSite, CyrusOne, DuPont Fabros Technology, Digital Realty Trust, Equinix, Quality Technology Services) with some having their largest global portfolio presence in Ashburn, VA. Many other providers are expanding or vying for a new presence in Northern Virginia.
The report found Northern Virginia to be the most attractive enterprise user location for wholesale and retail data center space, with rental rates at:
- < 250 kW: $140-$180/kW (+E)
- >250 kW: $120-$140/kW (+E)
The 2015 Data Center Outlook highlights other factors such as increased demand and M&A (mergers and acquisitions) activity among owners currently impacting the data center markets both in Northern Virginia and across the county.
Expanding Footprints
Skyrocketing demand, low risk of natural disasters, and proximity to fiber networks also play key roles in choosing where to locate a data center, meaning providers are being pressed to offer greater coverage and service options, points out JLL.
Many of them are turning to mergers and acquisitions to keep pace, like Digital Realty, which recently purchased Telx for $1.9 billion, nearly doubling the provider’s footprint and adding substantial services offerings for the company.
Shift to colocation
Construction costs associated with a new data center are high, and the infrastructure investment can be as much as two to three times the amount to build, another reason why M&A has surged as small / medium-sized providers combine with larger providers to seek lower sources of capital.
The expense is greater for enterprise users, who have increasingly shifted away from owned and build-to-suit facilities to the third-party providers to offset cost and maintain flexibility with colocation deployments that allow enterprises to provide on-demand solutions to their expanding customer base.
