DCF Podcast: Ashburn, Virginia – Where the Cloud Meets the Earth

By GIXnews


The Data Center Frontier Show podcast tells the story of the data center industry and its future. Our podcast is hosted by Rich Miller, editor of Data Center Frontier, who is your guide to the ongoing digital transformation.

DCF Podcast Episode 2: Ashburn, Virginia – Where the Cloud Meets the Earth

Northern Virginia is home to the largest concentration of data centers in the world, with more than 5M SF of data center space, and more on the way. Ashburn is located in Loudoun County, which is home to more than 100 data centers. Our host Rich Miller explains how Ashburn became Data Center Alley and what’s going on there today.

Links to resources Rich mentions in this episode:

  • Northern Virginia Market Update
  • In Loudoun, Neighbors Want Better Looking Data Centers
  • Silicon Valley Data Center Market Report

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Sponorship and Contacts:

Our first season of the Data Center Frontier Show is sponsored by T5 Data Centers. For future advertising opportunities, contact Kevin Normandeau at [email protected] For feedback and questions about the podcast, contact Rich Miller at [email protected]

Episode 2 Podcast Transcript

SEGMENT ONE

Everybody likes to talk about the cloud. But in reality, there is no cloud. Everything lives in data centers.

The real Internet isn’t just clouds and vapor – it consists of metal and cable and bricks and mortar. That includes all the servers and storage units to house your data, and the network hardware to deliver it across the global network. That’s the world we focus on here at the Data Center Frontier Show. I’m Rich Miller, the founder and editor of Data Center Frontier, and I’m pleased to welcome you to the second episode of our podcast.

Our topic today is the place where the cloud meets the earth, creating a physical manifestation of the digital world. When I want to see the Internet, I take a drive through a town in Northern Virginia called Ashburn, which has become the world’s largest concentration of digital infrastructure. As you drive along the major roads in Ashburn, you see huge data center buildings that are really the place where the cloud lives. These buildings house tens of thousands of servers, and are tied together by network cables that move data at the speed of light. This ability to drive through the Internet is one of the reasons that Ashburn has become known as Data Center Alley.

Northern Virginia is home to the largest concentration of data centers in the world, with more than 5 million square feet of data center space, and more on the way. Ashburn is located in Loudoun County, which is home to more than 100 data centers. There’s another 40 data centers in Prince William County, and more in Fairfax County as well. The electric utility serving the region, Dominion Virginia Power, says that the Internet industry in Northern Virginia is now using more than 1 gigawatt of power. To put that in perspective, 1 gigawatt is a thousand million watts of electricity.

Data Center Alley is one of the first places where residents can see the Internet. But it won’t be the last. That’s why I believe it’s important to talk about data center clusters like we see in Northern Virginia. There is a digital transformation sweeping our society and our economy. As it proceeds, we will see more data centers in more places. It’s important to understand data center clusters, not just for their role in how they shape the internet, but for the role they play in shaping the communities where these clusters are located.

Loudoun County in particular provides a unique case study of the benefits data centers can provide for a local economy. It also has seen a debate about the design and visual appeal of data center buildings, which it turns out is a topic on which people have some strong opinions.

For those of us in the data center industry, Northern Virginia is a key place to watch to understand industry trends. Data Center Alley has been the focus of frenzied development and competition. In many ways it is the home of the cloud, hosting a huge chunk of the infrastructure for Amazon Web Services, as well as cloud regions for Google, Microsoft and Oracle. The appetite for cloud capacity led to a spectacular burst of activity in 2018, when data center operators in Northern Virginia leased 270 megawatts of data center capacity, more than doubling the previous record for annual absorption. Data from Jones Lang LaSalle indicated that the region accounted for 55 percent of all data center leasing nationally.

2018 was an outlier in almost every metric, so it’s not surprising that activity has slowed in Northern Virginia, on a year-to-year basis anyway. For the first time in years, data center developers aren’t racing to keep pace with customers’ insatiable appetite for cloud computing capacity.

So what’s the latest on Northern Virginia? To find out, we’ve just published a major overview of the Northern Virginia market at Data Center Frontier, with input from six industry CEOs doing business in the region, and data from three different research reports on the area’s supply and demand. We’ll have a link to this story in our show notes,

But here’s an overview of our take on the mid-year outlook for Northern Virginia.

The first point is that context is important. At approximately 86 megawatts, the first-half absorption for 2019 is about half of that in the first half of 2018. But that 86 megawatts is also more absorption than has ever been seen in any data center market on earth – except Northern Virginia in 2018. Vacancy rates remain among the lowest in the industry, at about 3 to 4 percent.

There’s no question that hyperscale operators are seeking to digest their 2018 leasing. As they do, landlords are assessing strategies for processing more rational levels of demand – at least for the moment. Industry executives remain bullish on the region over the long term, but say the slowdown, even if it is short-lived, is having an impact on market dynamics. This shows up in several trends.

  • There’s been a shift in the balance of data center supply and demand, with less pre-leasing of data center space. In recent years, about 50 percent of new inventory in Northern Virginia has been pre-leased
  • This creates the possibility of pricing pressure, as providers may opt to offer discounts to attract tenants. This could be good for customers, who typically have multiple options in competitive markets like Northern Virginia.
  • Timing is more important. Some new construction projects are being re-evaluated or delayed, as developers conserve capital for the next burst of hyperscale demand.

Analysts say there are signs leasing will pick up in the second half of the year and early 2020. We have continued to see record valuations for land in Data Center Alley, and the region is experiencing a surge in what is known as “land banking” as developers buy up property to secure space for still more growth in the region in the future. This is part of what I call FOMO – the Fear of Missing Out. Northern Virginia will be crucial to the aspirations of cloud computing providers for many years to come, and no one wants to run out of data center capacity to support them.

Which raises an interesting question: How did Ashburn, Vrginia became the essential location for Internet infrastructure. We’ll dig into this after a short break. We’ll be right back.

SEGMENT TWO

So how why has Ashburn, Virginia become the Internet’s boom town. The town sits atop the world’s densest intersection of fiber networks, making it an ideal location to store and distribute data.

It is unique in its connectivity, and its data centers are laying the physical foundation of the digital economy.

Ashburn is about 30 miles west of Washington in Loudoun County. Why is it so important? Thirty years ago Ashburn was mostly farmland and open space. Over time, it has developed into the most important Internet intersection. It is where all the networks meet. This process started with early IT infrastructure for US government agencies, followed by the evolution of one of the Internet’s first major interconnection point, known as MAE-East. MIt was one of two key Internet hubs in the early days of the Internet, along with MAE West, which was located in the Market Post Tower, a building in downtown San Jose notable for its gold glass exterior. In those days, if there were major Internet problems, it was often because of a network snafu at MAE East or MAE West.

Ashburn really began its evolution into Data Center Alley in 1998, when a startup called Equinix built its first data center, providing a “carrier-neutral” facility where companies’ networks could tap into Internet backbones.

The Equinix campus quickly become the Web’s busiest meeting place, creating a powerful network effect in which each new connection adds to the value of its digital ecosystem.

This helped Equinix experience rapid growth, and it soon began building additional data centers.

This is a good time to discuss the most important factor in real estate: Location, location, location. Soon other people wanted to be close to the Equinix campus and all the networks inside it.

A couple of factors have helped growth in Ashburn and Northern Virginia.

  • Power. Data centers need an extraordinary amount of electricity, and power in Northern Virginia is more affordable than other parts of the Northeast, particularly New York and Boston, which have enormous business activity, but power costs that or twice what you might pay in Ashburn. The local utility also matters. Dominion Energy is one of the most effective utilities in working with data center customers to ensure they have the power they need, when they need it.
  • Tax environment. Data center companies receive exemptions for sales and use taxes if they invest more than $150 million in computer equipment and software. Virginia recently extended those economic incentives through 2035, ensuring that the state can keep pace in an increasingly competitive environment for large data center projects.
  • Support of the economic development officials. In Loudoun County, officials’ support has also been important. This gained momentum in the mid-2000s with the arrival of Buddy Rizer as director of economic development. Rizer saw an opportunity in working to support the data center sector, and took time to get to know the data center companies operating in Ashburn and understand their priorities. The County then refined its approval processes to make it easier for data centers to move smoothly through the zoning and permitting process.

We’ll be right back.

SEGMENT THREE

Data centers have been good for Loudoun County. tremendous economic benefits – tax rate, schools, hiring.

Residents like the economic benefits of data centers, but they’re not entirely thrilled with the appearance of these buildings. Security gates, equipment years where cooling towers and water tanks face the roads, long boxy concrete bunkers. The bottom line: they’d like more attractive buildings and better landscaping.

Some history: data centers are optimized for uptime and security, not making the cover of architectural digest. In the early days of industry, customers wanted them to be as anonymous as possible, a practice known as “security through obscurity.” As a result, developers avoided any features that would attract attention, and often sought locations in business parks and sites with a low profile.

Things began to change as the Internet grew, and data centers emerged as major economic development opportunities. For many officials, data centers became symbols that a town was making the transition to the new digital economy. It’s hard to stay anonymous when local officials want to spotlight your business as a sign of economic progress, and when states and towns are offering tax incentives.

It’s particularly hard to maintain a low profile once you have more dozens of data centers clustered together along the major roads through town. That, of course, is what we see in Ashburn. Some data center operators have focused on design and sought to create data centers with visual flair. Others continue to build huge structures where the visual interest consists of different shades of gray.

That provides some context for a recent debate on the Loudoun County Board of Supervisors, which discussed whether to add additional steps to the approval process to improve the visual appearance of data centers. Meyer commentary. Other supervisors felt the data center industry has made significant progress on designing better buildings, and the entire board was mindful of the economic windfall residents have experienced from the presence of data centers.

The end result was a commitment to include performance-based design guidelines in future zoning guidelines, with the data center industry being actively involved in the discussion. Summary of article, link in the show notes.

Some folks in the data center industry welcome the community focus on design and creating better looking buildings. Others find residents’ complaints about visual design annoying, and suggest residents don’t fully appreciate the industry’s enormous investment in the region. Others say the data center industry is being singled out, and held to a higher standard than big box retail stores and warehouses that present a similar appearance.

What’s clear is that the days of anonymity are over. Data centers are an important part of their community. As Buddy Rizer notes, the data center industry has been a good neighbor in Loudoun County. Even the most important economic engines in the local economy have to be active stewards of their reputation. As we see data center clusters in more places, the industry’s profile will only increase. At Data Center Frontier, we’ll be paying close attention to these trends, as we continue to tell the story of the data center industry, One Podcast at a Time!

Source:: Data Center Frontier