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Loudoun County Wears The Global Data Center Crown, But All Is Not Well In The Kingdom

For decades, Loudoun County has housed the largest concentration of data centers in the world to support the bulk of the world's web traffic — and it has ridden wave after wave of record-breaking development.

Loudoun has been the beating heart of the global data center universe for years, but an arrhythmia seems to have taken hold in recent weeks, and insiders who spoke to Bisnow have begun to fret.

The county, which pioneered data center development in the U.S. during the 1990s — famously trading farm fields for massive computing warehouses — is now facing an existential threat: It could begin to lose to rivals across America.

So what has spooked the industry and the Loudoun juggernaut?

Local politics.


During multiple hearings in recent weeks, Loudoun County’s Board of Supervisors has displayed an increased skepticism toward new data center development in the county.

After years of little to no resistance, local residents, flanked by elected officials, are becoming more assertive in their dealings with the data center industry and have sought to put firm limits on where data centers can be built — if at all.

“It feels like the tide has changed recently,” said Mike Rechtin, who heads the data center development practice at law firm Seyfarth Shaw.  

“I have major clients who are saying: yeah, we’ve got to do it [in Loudoun], but we really are starting to take a strong look someplace else, and not necessarily because of the pricing, but because you've run out of places to build these and you have a political environment that is going to only get increasingly more negative towards data centers,” Rechtin said. “I don't see that changing as the populace understands what they are.”  

Loudoun County has the highest concentration of data centers on Earth. Northern Virginia has more square feet of data center space than the next six largest markets combined — and about 80% of that space is in Loudoun, clustered near Ashburn, Leesburg, and winding around the periphery of Dulles International Airport.  

Even as other data center hubs have sprung up around the U.S., demand for data centers in Loudoun continues to grow at a record pace.

Northern Virginia had close to 300 megawatts of absorption (data centers often measure facility size by the power they use) in the second half of 2021 alone, the most on record, according to brokerage Cushman & Wakefield. Loudoun has more than 4M SF of new data center space currently under construction, according to CBRE, a figure that the area has only touched twice previously.  

In 2022, developers have continued to plan massive data center projects in Loudoun. Stack Infrastructure announced on Jan. 6 it plans to build a three-building data center campus totaling nearly 1M SF and 216 megawatts in Ashburn. A joint venture of American Real Estate Partners and Harrison Street announced on Jan. 12 it plans to develop up to six data centers totaling 2.1M SF in Ashburn and Arcola.   

A rendering of AREP and Harrison Street's planned ABX-1 at Beaumeade data center in Loudoun County.

Loudoun has remained the hub of the digital universe by making data centers the heart of its economic development strategy. County officials pioneered a data center-friendly tax incentive structure that has since been copied by every successful data center market, and it designated areas for data center development before data centers were an established asset class.

The county has bent over backward to create an easy business environment to build data centers, offering streamlined permitting, funding local workforce development programs and even building a recycled water system used for cooling the facilities.

Perhaps most importantly, data center developers, accustomed to local politicians with little understanding of the industry, liked working with a county government that not only offered little resistance but understood the nuances of network connectivity, redundant power and server racks. In an industry that prizes speed to market, this has continued to make developers ignore skyrocketing land prices throughout the so-called Data Center Alley. 

“The thing we have to continue to focus on is being a great place to do business, continuing to have outstanding time to market, a predictable business environment and a predictable tax environment,” said Buddy Rizer, Loudoun County’s economic development chief.

“These are things we need to continue to do to be successful.”  

But this friendly environment may be changing.

In recent weeks, county officials have made moves to limit data center development that industry observers say would have been hard to imagine until recently.

Loudoun County Board of Supervisors Chair Phyllis Randall at the board's Feb. 16 hearing on data center land use.

The county’s Board of Supervisors appears poised to enact new prohibitions on data centers along Route 7 north of Dulles Airport. This comes just weeks after the board raised eyebrows with the rare rejection of a developer’s application for a zoning exemption to build a data center.

And on Wednesday, a proposal put forward by the county’s Department of Economic Development that would have opened a new part of the county to data centers was met with hostility by some board members. 

“If we turn this large chunk of land into data center alley … it would be totally opposite of the majority of public input we just got recently from our residents,“ said Loudoun County Supervisor Tony Buffington at a public hearing Wednesday.

“I will fight this so hard, every step of the way.”  

Loudoun County Board of Supervisors Chair Phyllis Randall said that while the data center industry has spurred a massive tax revenue windfall for the county, that alone isn't a reason to let it grow unchecked.   

“Decisions have to be well beyond what's in the best interest of just one industry, albeit one that's been very good for us financially and even good for us socially," Randall said during Wednesday's hearing. "What else are they going to say except that they want data centers everywhere?”  

Across the data center landscape, this sea change is setting off alarm bells.  

“Since this has come out, my phone has lit up and with a lot of concerns from the industry,” said Supervisor Caleb Kershner, speaking at a hearing on the proposed data center ban in the Route 7 corridor.

“I think the big concern is they have made multimillion-dollar decisions in certain places, or investments or certainly plans, and they are concerned that some of that may be impacted by this design, depending on how radical or how far we go as a board making some of these decisions.”  

Cooley LLP partner Colleen Gillis, one of the county’s most active land use attorneys who works with data center clients, said data center developers are paying close attention to the actions the board is taking.  

“Are there ripple effects for clients of mine when the board turns down a data center? Of course,” Gillis said. “Do all of my clients then go ‘why did they turn this down? Am I going to meet the same fate?’”  

“It all comes back to certainty,” Gillis added. “So I try to help my clients make sense of what’s happening in the greater political environment so we can navigate it to the satisfaction of the Board of Supervisors and my clients. And if there’s no way to get there, my job is to say, ‘What you want and what they want are never going to see eye to eye,’ and to facilitate something that’s a little bit different.”

A map from Loudoun County's Data Center Land Use Study showing the land occupied by data centers in the county.

This growing willingness by elected officials to more actively regulate data center development comes after a period of record data center build-outs that have transformed the county landscape.

In 2019 alone, Loudoun saw a 60% increase in data center space, from 14.7M SF to more than 23.5M SF.

With this kind of growth, the availability of land that can accommodate data centers is becoming rare. And the willingness of local officials to make exceptions to the rules for data centers seems to be disappearing as well.  

From a planning perspective, data centers, along with the substations and power lines they require, can industrialize retail and residential areas and create dead spots that hurt other businesses in the area. The Board’s urgency to ban data centers along the Route 7 corridor centered around preventing the high voltage transmission lines that would have to be built through commercial areas to power the facilities.

Similarly, the body’s decision this month to reject a proposed data center near the Dulles Town Center mall focused on its potential impact on the shopping district.  

“At that corner, you will be sitting there looking at chain link and barbed wire around an electrical substation or around a data center or some of these other industrial uses,” said Loudoun County Planning Commissioner John Merrithew, speaking prior to voting against the proposal.

“This is a high traffic commercial corner, and a high traffic commercial area adjoining the site. Shopping centers around the continent are tenuous at best and just hanging on, and I’d hate to see anything happen adjoining the site to impact the viability of that shopping center.”

Efforts to limit data center development also center around broader concerns for the county’s economic future. Unlike an office building or multifamily development, land value is only a small part of the profitability equation for data centers. This means data center developers can effectively overpay for a property, and in Loudoun this has driven up land prices to a point that other types of development have become unfeasible.

“This is not a bash on data centers, but we are having an issue with finding land to build flex industry buildings,” Loudoun County Supervisor Syliva Glass told Bisnow. “Those buildings usually have smaller businesses, small mom-and-pop, the person that wants to have a daycare in that area or an after-school program or some type of dance or other small businesses that you wouldn’t find anywhere else but that would need a lot of space.”  

Loudoun County Economic Development Executive Director Buddy Rizer and CoreSite Eastern Region Vice President Juan Font

As data centers price out other businesses, officials have also expressed concern over what they call the unsustainable risk of having the county’s financial wagon hitched to a single industry. At present, around 40% of the county’s tax revenue comes just from data centers.  

Yet balancing this long-term planning with the county’s short-term finances could be a tough tightrope to walk.

The aggressive depreciation schedule on data center equipment that is central to Loudoun’s appeal for developers means that tax revenue for data centers comes disproportionately from new data centers. So if development slows, so will revenue. And the massive value of the equipment in data centers means the growth of other industries won't come close to replacing what a data center would provide.

“There is no asset class out there that provides [as much] tax revenue per square foot as data centers,” Rizer said. “There’s nothing even close.”  

And now, Loudoun County isn’t the only show in town. Increasingly, developers who want or need to be in the Northern Virginia data center hub have other options, as neighboring Prince William County, Fauquier County and nearby Prince George’s County in Maryland try to replicate Loudoun’s appeal.

Industry insiders say that the perception of a changing political climate in Loudoun County is already driving developers to take a harder look at these neighboring areas — which might take the lion’s share of growth in the not too distant future.  

“I think you'll just see more of those deals kind of go into adjacent counties,” Rechtin said. "And now it's like 30% of the deals are going to be [in Loudoun] and 70% are going to be in adjacent areas."