Northern Virginia remains the world’s largest data center market, but the market faces increasing constraints, particularly land and power availability, according to a new report from real estate firm JLL.
In 2023, 1,900 megawatts of multi-tenant data center inventory was delivered and 2,100 megawatts of single-tenant inventory was delivered. Another 1,340 megawatts are currently under construction.
Data center leasing activity reached an all-time high in 2023.
The Northern Virginia data center market ended the year with 51 million square feet of total active data center space. That’s the equivalent of about eight Department of Defense units and about 4,000 megawatts of inventory, a measure of data center capacity. That would require enough electricity to power about 800,000 homes. This is three times the capacity of Singapore, the world’s second-largest data center market.
Power company Dominion has historically met demand, but has struggled in recent years to meet the surge in power demand, JLL said. Although data centers generally look unassuming from the outside, they require large amounts of power to operate.
“Data centers generate a lot of heat, so they use advanced air control systems to keep computers running cool.”According to Dominion, the amount of power used in data centers will increase from 2018 to 2022. and we predict it will double again by 2028,” said Michael Hartnett, senior director of mid-Atlantic research at JLL.
To address energy constraints and meet future demands, major power transmission infrastructure is under construction to serve the data center market, starting with two 500 KV transition lines in Northern Virginia.
The development of power lines and data centers is not without controversy, as local governments grapple with land conservation and environmental issues.
Among the developments facing opposition is the construction of the world’s largest data center campus in Prince William County and another huge data center planned for Fairfax County.
In addition to energy demands, data centers also require a lot of space, and data center developers face fewer development options, which translates into fewer leasing options for data center customers. .
As a result, the average office building vacancy rate in Northern Virginia is 22%, while Northern Virginia’s data center vacancy rate is less than 2%. Additionally, rental rates continue to rise, forcing corporate users to act quickly to secure space.
As land fears continue to grow, hyperscalers are looking for options beyond Loudoun, Prince William and Fairfax counties.
“One of the counties would be Fauquier County, where we’re starting to see an increase in demand from data center operators,” Hartnett said. “Another way to look at it is that developers are looking beyond Northern Virginia to secondary markets. There is a sex.”
For developers, Northern Virginia’s data center market remains lucrative. JLL reports favorable market conditions continue, with record demand exceeding 1 megawatt and large sites in Loudoun and Prince William counties trading at a premium.
Nearly all of Northern Virginia’s data center demand is for cloud services, accounting for 82% of occupancy at the end of 2023.
JLL’s complete North American Data Center Report is free to download, but registration is required.
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