MAE-East, the first Internet exchange, was launched in 1992 in an office building at 8100 Boone Boulevard in Tyson’s Corner, Fairfax County, Virginia.

It’s said around half of all Internet traffic in the early 1990s passed through this small point in Old Dominion.

Set up by Metropolitan Fiber Systems and UUNET, MAE-East was then expanded across a cinder-block room in an underground parking garage across the street at 1919 Gallows Road around 1996.

Once MAE-East moved to Equinix’s DC2 facility at 21715 Filigree Court in Ashburn, AboveNet continued to operate a data center at 8100 Boone, which was taken over by Digital Realty in 2006, but the colo firm has since exited the site.

Loudoun County, meanwhile, has become the data center capital of the world.

Over the past 15 years, Loudoun has built more than 30 million sq ft (2.7m sqm) of data centers, with another five million sq ft currently in development.

Neighboring Fairfax County reportedly has around 29 facilities in operation with a pipeline of 4.4 million sq ft of (440,000 sqm) space under construction, more than doubling the existing inventory.

Nearby Prince William County, already home to nearly seven million sq ft (650,000 sqm) of capacity, has an additional 30 million sq ft (2.78m sqm) under development.

But times change, and as Loudoun reaches saturation point, data center developers are looking south for new opportunities.

Data Center Alley is full – just about

Northern Virginia Technology Council (NVTC) reports that Virginia has seen more than $200 billion in data center investment. In 2023 alone, the industry provided 12,140 operational jobs and 14,240 construction jobs in the state. In 2022, data centers paid $640m in taxes to the Commonwealth of Virginia and $1 billion to local governments in Virginia.

According to the NVTC, it was only in 2016 that Northern Virginia (NoVA) finally supplanted the New York market as the largest data center market in the US.

Today, Virginia has more capacity than most of the other major US markets combined, with gigawatts of capacity in operation and gigawatts more in development.

Vacancy rates in NoVA remain at historic lows, at one percent or lower. But land and power are hard to come by amid a transmission crunch grid operator Dominion is working to rectify.

Northern Virginia continues to grow, but the pace is slowing.

According to H1 2024 data from CBRE, NoVA remained the largest data center market, with 2,611.1MW of inventory and 1,157MW under construction. The area saw 108.1MW of total absorption during those six months, down 87.4MW, or 43.9 percent, year-over-year. H2 2023’s 424.4MW absorption was down 12.5MW year-on-year; H1 2023’s 192.8MW absorption was down 76.5MW after increases in 2022 and 2021. Its inventory growth of ‘only’ 113 percent since 2020, puts NoVA in fifth place nationally in terms of relative growth.

Data centers have been good for Loudoun’s tax base over the years. It's a revenue stream so large for the country that it sometimes creates hiccups, such as when building slowed in 2021, leading to a $60m shortfall in tax revenue. Because of this, the county is looking to diversify, targeting more life sciences and cybersecurity investment. But the good times aren’t quite over, and 2024 has seen plenty of activity in NoVA. DataBank is building a 20MW facility in Ashburn due to come online in 2026, and Yondr also broke ground on a new 48MW building in Loudoun’s Arcola, to name but two.

“Loudoun County still has enough projects in the pipeline to potentially triple its current capacity,” says Lilli Flynn, senior analyst at data center market analyst firm DC Byte. “Ashburn still has a huge amount of demand despite longer project timelines.”

Even county rule changes might not prevent future projects coming into play. Companies, including Prologis and the Washington Commanders, have recently sought permission to build data centers on land around Sterling and Ashburn in the future, despite having no immediate plans to do so.

“I think the Dominion announcement initially scared people away from Loudoun – there was a dip in the county’s share of the market in 2022 as operators started looking elsewhere, but it bounced back in 2023,” says Flynn. “I think the county will grow a lot slower than we’re used to seeing, but I often say that Loudoun can slow down but can’t be stopped – I think the Ashburn name is still a draw in the industry and I don’t see the pipeline emptying out anytime soon.”

But the days of unbridled data center growth in the traditional Northern Virginia markets look to be over. Instead, companies are looking further south to new counties within the commonwealth.

New Counties, new opportunities

The NVTC report notes that even if you removed Northern Virginia - Loudoun, Fairfax, and Prince William Counties - the rest of Virginia would still rank ninth among the top 10 data center states in the nation.

Many more developments are planned in the state. Jeff Groh, executive managing director, brokerage at JLL, says Virginia’s “emerging markets” are experiencing dynamic growth. “The big story is the I-95 Corridor from Stafford to Richmond,” he says.

Spotsylvania, Pittsylvania, Fauquier, Culpeper, King George, Surry, Stafford, Caroline, Lousia, and Mecklenburg Counties have all seen new large-scale data center developments announced or applied for since 2022 as developers look to cash in.

“It's been very interesting to see the spread away from Loudoun County recently,” says DC Byte’s Flynn. “Prince William County seemed like the obvious successor to Loudoun and saw an increase in planned projects after Dominion announced its power crunch in Loudoun.

“However, the area’s largest data center projects have been hit with resident backlash and litigation. Culpeper and Fauquier Counties have seen a lot of activity recently.”

Culpeper County, some 55 miles south of Ashburn, has seen one of the biggest transformations. For decades, it had only been home to a Swift data center and a former Terremark campus now operated by Equinix.

Now, after AWS secured permission for a two-building data center campus totaling 430,000 sq ft (40,000 sqm) in 2022, a bevy of other companies have followed suit into the county. CloudHQ, DataBank, Pertson Companies, EdgeCore, and others have all been granted permission for data center campuses totaling millions of square feet and gigawatts of capacity.

As well as Culpeper and some existing projects in Prince William, Fairfax-based developer Peterson Companies is building a 525-acre campus in Stafford County that could total more than 25 buildings and 5.5 million sq ft (511,000 sqm) once fully built out.

“That is a 1.8GW campus, and have another property in Stafford County kind of nearby that's 83 acres and another 300MW, so just in Stafford County alone today, we're over 2GW and continuing to grow,” Adam Cook, Peterson’s managing director for development, tells DCD.

Stafford County appealed, he says, because the company had an existing landbank there and the county had the right mix of utility and technology infrastructure to support its plans. Amazon also has a campus planned in Stafford.

Cook says there’s “still some juice” left in Loudoun, and adds: “Virginia is open for business outside of Loudoun. I think that the big operators are appreciating the ability to build bigger campuses, instead of having to focus on one building at a time.”

PowerHouse is developing an 800MW campus in Spotsylvania County. The 145-acre site could see up to eight three-story buildings developed, totaling 3.5 million sq ft (325,160 sqm).

“We’re seeing tiering of the architecture,” says Matt Monaco, senior vice president of asset management and development at PowerHouse. “AI workloads, especially the training, don’t have the latency sensitivity. You’re seeing the circle from Loudoun expanding to include Culpeper, Spotsylvania, and Richmond.

“I think that path of development down through Richmond is all interesting at this point. 300MW and above is the cost of entry for a lot of these big players, and the gigawatt campus is a real sweet spot,” he adds. “And the time to market matters a lot right now.”

Further south around Richmond, numerous companies are planning new data centers in the likes of Henrico, Chesterfield, Hanover, and Powhatan counties.

QTS has filed to expand its existing footprint and add a new campus in the area, while newer operators like DC Blox and local developers such as WestDulles Properties and Province Group have sought permission for new campuses. Chirisa has filed to expand its existing site to potentially reach more than a 1GW, and Tract has a massive gigawatt campus in the works that other operators can develop on.

While it might seem like a sudden gold rush, things have been moving behind the scenes for a while.

DCD understands a number of these projects have been in discussion between companies and counties for years ahead of them being of them being officially filed or announced.

Backlash and Outreach

The benefits of data centers are well-established at this point.

They can bring in huge tax revenues - unless they are given overly generous subsidies - and generate lots of short-term construction jobs, alongside a handful of long-term well-paid ones. The clustering effect often leads to jobs and investment from other facilities and its wider supply chain.

But it’s also a fact they can blight a rural landscape, and use a lot of power and, often, large amounts of water. These facilities also generate plenty of noise, and diesel generators can impact air quality.

It’s not usual to see significant opposition to new developments, especially in areas without major industrial development.

Opposition groups including American Battlefield Trust, Sierra Club, the Coalition to Protect Prince William, Citizens for Fauquier County, and the Piedmont Environmental Council are mobilizing organized opposition to data center developments across the state.

Several groups - many part of the Data Center Reform Coalition - have filed lawsuits against proposed developments.

Peterson’s Cook claims his firm “welcomes” reasonable opposition.

“We're happy to have those conversations, where others sometimes don't or hide behind larger corporate facades,” he says.

“Those conversations are not always easy,” he adds. “But they're important for us and they're important for communities. And having those conversations is better than not having them, and it's not an unfair ask that local communities get something out of this.”

Local officials are wary of stoking the ire of their residents, and data center operators need to be equally careful, lest they mobilize the kind of opposition levied against the Digital Gateway project in Prince William – which saw hundreds of people speak against the project in marathon 24-hour council meetings.

DCD has received more than a few angry emails from local residents irate about new data center developments coming to their town or county.

“We're not anti-data center,” says Julie Bolthouse, director of land use with Piedmont Environmental Council (PEC). “We're quite aware of the role that data centers play in modern society.”

Bolthouse says she’d like to see the industry recognize her organization’s concerns.

“They give us lip service, but we’d like to see us come to an understanding that there is more of a need for transparency and start to recognize that we're headed towards a tragedy of the commons,” she says.

When asked if the PEC is in favor of more data centers in the traditional NoVA markets or more of a focus in newer markets instead, Bolthouse is conflicted. “Initially, I would have said that it's better for us to see these projects happening in a more dispersed fashion,” she says. “But at this point, the grid is so overcapacity across the entire state. And I don't want to say putting them out in rural areas is a good idea either – putting them out in farm fields doesn’t make sense.”

She notes that, just like in Loudoun, questions remain around how much transmission infrastructure these localities will see built out to support all the new capacity, and believes a pause on developments is necessary.

According to Bolthouse, there’s a need for “some real planning and transparency about what would actually make sense, to make sure that we're not doing things in multiple places that are pulling against each other and causing massive problems.”

Working with the government

Officials across Virginia have long eyed the tax revenues Loudoun generates from its data centers while being wary of the impact too many facilities could have on an area.

Many counties are actively trying to lure operators to their counties, resulting in many changes to local regulations and major overhauls to how counties operate.

“We're trying to get our arms fully around what it means to go from a data center community of about 500,000 square feet to now 10 million square feet,” Bryan Rothamel, director of Culpeper County Economic Development (CCED), tells DCD. “What do we need to do and how do we need to respond?”

“We really need elected staff, planning staff, and executives all to be aligned, and then go to the economic development folk,” says Peterson’s Cook. “In the communities outside Loudoun where you see them benefiting from the future data center growth, you've seen those groups come together really well.”

Cook says his company has been helping multiple counties write their zoning ordinances, looking at locations for tech overlay or special exception zones, as well as potential tax rates, in order to avoid falling into what he calls the “Loudoun trap.”

When it comes to ordinance, Cook says the magic formula is pretty simple; identify where you want data centers, keep them away from schools and residences, make sure you incentivize correctly and understand the tax base, and have the right processes in place. Defining requirements around setbacks, buffers, height, and architectural factors is also key. Including ways to enforce ordinances is also important to give the regulations teeth.

“If you can define your overlay, you're in a better position,” he says. “I think Culpeper did that better than anyone in really defining the territories in the areas in which they would allow data centers.”

Not all local governments are equally welcoming, however. Despite the lure of new tax revenue, many counties are introducing stricter regulations to prevent uncontrolled data center sprawl.

Fauquier County has passed several zoning ordinances that restrict the development of data centers. After a change in make-up following local elections, King George County supervisors backtracked on giving approval to a massive Amazon data center campus.

“Fauquier approved new regulations for data centers which have been called some of the strictest in the state,” says DC Byte’s Flynn. “This could prove to be a serious deterrent, though a few projects have been made exempt from the new permitting process.”

“Not every county wants data centers,” Cook adds. “Some of the counties want to really maintain their rural identities or they just don't have the infrastructure or talent base to support a data center.”

Is the rest of Virginia ready?

Data centers need power, water, fiber, and people. Loudoun has traditionally been able to provide all four, but whether the rest of Virginia can match up - particularly when it comes to green power - is questionable.

As well as the common concerns around aesthetics and noise, PEC’s Bolthouse notes serious questions around water use will have to be addressed.

Data centers are notoriously thirsty, and different counties are approaching water use differently, with some allowing the use of groundwater.

The PEC is also concerned about the impact more generators could have on air quality around Virginia.

And though Virginia is adding renewable energy capacity quickly, Dominion recently said it had connected 94 data centers with more than 4GW of capacity in Northern Virginia since 2019, and expects to connect more than a dozen new facilities in 2024.

According to the Solar Energy Industries Association (EIA), Virginia's installed solar capacity topped 5.4GW in Q1 2024. EIA figures suggest renewables in total make up around nine percent of Virginia's grid mix. Natural gas makes up more than half (54 percent), with just under a third coming from nuclear. Coal makes up less than five percent.

In September 2024, grid operator PJM - with a service area that includes Virginia - raised concerns that many renewable energy projects in its US region are not being built despite receiving approval to connect to the grid.

The operator said 450 projects promising 37.2GW in capacity have agreed interconnection deals but are not yet online. While many of these are under construction, 12.1GW of the total is considered “suspended,” meaning interconnection work is not underway, potentially creating future capacity issues.

“I think power infrastructure will continue to be an issue going forward,” says DC Byte’s Flynn. “It seems like slower development timelines across the board in Virginia will be the new normal.”

Peterson’s Cook agrees that access to power will become “increasingly difficult” and on longer timescales.

“I think we'll see more secondary and tertiary markets open where there are pockets of power and the intersect of those other utilities and favorable economic and government positions,” he says.

Cook notes the current boom outside NoVA is leading to rampant speculation that is adding to the issues, as the requirement to serve all customers equally is “stymieing” utilities that don't have the resources to support all the inquiries that they're getting.

“Uninformed and irresponsible land speculators get the same attention from Dominion as the legitimate recognized operators,” he says. “Everyone who has an acre thinks it's worth millions of dollars as data center land, and that's creating chaos in the market. The saturation of requests coming into the utilities is nearly crippling them.”

Culpeper’s Rothamel says his county knows there is probably a “ceiling” on the number and scale of developments it wants to host. Once the approved projects have been built out over the remainder of the decade and beyond, the county will assess the impact and go from there.

“We envision us as a piece of the puzzle,” he says. “This is a massive change for a community of our size. We can't and we're not interested in competing with our neighbors to the north.”

While each county will have its own ceiling and perceived saturation point, it’s clear Virginia will continue to lure new projects to the Commonwealth for years to come.

“There's a lot of opportunity and a lot of growth still in the pipeline for Virginia,” says Peterson’s Cook. “We haven't truly seen the economic boom yet, it's still yet to come.”