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Loudoun County Passes New Rules To Restrict Data Center Growth

An aerial view of Loudoun County, Virginia, the world's largest data center hub.

New restrictions on future data center development in Loudoun County have some existing operators facing growing uncertainty.

Loudoun County’s Board of Supervisors voted late last month to place new restrictions on data center development, Data Center Dynamics reported. The rules — a response to growing concerns from residents in the world’s largest data center market — are primarily concerned with future development, effectively preventing new data center builds in significant swaths of the county.

The rules have also created uncertainty for some operators of existing facilities in the impacted areas who planned future expansion, and for developers who purchased land at huge premiums with the expectation that data centers could be built there. While there is optimism that these stakeholders won’t be hung out to dry, industry insiders say key details necessary for data center providers to plan their future in the county remain unresolved. 

“We’re on a course to try and resolve some of the uncertainties,” Josh Levi, president of the Data Center Coalition, told Data Center Frontier. “We’ve had productive discussions with staff about implementing how this will work.”

With more than 200 data centers within county lines, Loudoun has the highest concentration of these facilities in the world. Its 26M SF of data centers make it the heart of a Northern Virginia data center market that is nearly seven times larger than any other.

While there are a host of reasons why Loudoun County emerged as the globe’s digital infrastructure hub, a major contributing factor has been the fact that key sections of the county allowed data center development by-right. As demand for data centers exploded, new projects in Loudoun were able to move forward quickly, and investors paid huge premiums for sites they knew could be developed as data centers without the uncertainty of a lengthy approval process. 

But the volume of data center development in Loudoun County — as well as in its surrounding jurisdictions — has led to pushback in recent months. Residents and political leaders have increasingly voiced concerns about the visual impact of large data centers near residential and commercial areas, and they worry that demand from data center developers has priced out other users. 

New regulations, passed in late September by the county’s board of supervisors, aim to address some of these concerns by effectively prohibiting new large-scale data centers in some parts of the county, while requiring further approval processes in others.

Along with a number of new design and environmental requirements, data centers will no longer be allowed by-right in neighborhoods designated as “suburban mixed-use” — an area that accounts for 887 acres of undeveloped land — or in areas designated as “Urban Transit Center.” The latter designation was also expanded to include additional land that houses existing data centers. 

While these new rules are targeting future development, industry insiders say they have placed some operators and developers who already have a footprint in Loudoun County in a state of limbo.

The county’s plan left unresolved the fate of two constituencies within the data center industry: companies with active data centers in the affected areas who had been operating with the expectation that they would be able to expand their facilities, and developers engaged in so-called land banking who bought land where data centers used to be allowed by-right but hadn't yet begun the development process. 

The fate of existing operators has raised the most concern among industry groups like the Data Center Coalition. Although the new regulations explicitly say these facilities will be able to continue operating, it is unclear whether future expansion will be permitted. DCC’s Levi told Data Center Frontier that many of these companies had planned their long-term strategies around being able to build out future capacity at some of these sites, and whether that will still be allowed remains unclear. 

“You’re being moved into a place classification where data centers are not wanted over the long term. What does that mean when you need to update your site to make sure it can remain competitive?” he said, according to Data Center Frontier. “There are questions as to how that will play out. When you go to the board for a special exemption does that mean you will still be able to expand?”

According to Levi, the outlook for sites that have been land banked by data center developers is more promising. Developers unable to build data centers on these sites would almost certainly have to sell the land at a significant loss, but Levi indicates that the board seems set on ensuring that parcels bought for data center use will still have a pathway for development. Still, he said the new restrictions create a far more unstable future for the data center industry in its global hub, with the fate of some sites potentially at the mercy of the political winds. 

“The board provided some assurances about their intent,” Levi said. “But this is still an area where there is uncertainty. The question is whether other board members in the future will feel similarly.”

Related Topics: Loudoun County