Amid Pandemic, Data Center Alley Going Strong

Estelle Sidler

During the COVID-19 pandemic, businesses, schools and social circles have all gone online, which has meant unprecedented demand at the heart of the internet in Ashburn. Loudoun’s data centers, already a fast-growing market, have seen a surge of demand as society has scrambled to replace in-person activities with virtual alternatives. […]

During the COVID-19 pandemic, businesses, schools and social circles have all gone online, which has meant unprecedented demand at the heart of the internet in Ashburn.

Loudoun’s data centers, already a fast-growing market, have seen a surge of demand as society has scrambled to replace in-person activities with virtual alternatives. Long an important part of the county government’s budget, they have also been a bright spot as other sources of local tax revenues have fallen. Assistant Director of Management and Budget Caleb Weitz told county supervisors in July that the tax on computer equipment inside data centers accounts for nearly $395 million in the current fiscal year’s $1.7 billion in local tax revenues, and that revenue could grow by another $200 million next year. Replacing all the revenues from data centers in this year’s budget with real estate taxes would require raising the current $1.035 tax rate by more than 41 cents.

All that, because Loudoun is what Sabey Data Centers General Manager Michael Whitlock called the “Super Bowl” of data center markets.

“Anybody who’s any type of competitor wants to be in Ashburn,” Whitlock said.

The past six months have been busier than ever for Sabey, a company that also includes a data center construction arm that has helped them keep up with the demand for data center space. The company’s 38-acre Intergate.Ashburn campus opened its first building in 2017.

Whitlock said what draws data centers to Ashburn is the fiber optic connectivity, the cheap and reliable power, and the talent.

“It’s the Hollywood of Hollywoods as it relates to the data center, so everybody who wants to be a star, who is already a star or who potentially wants to be a star, is in Ashburn,” Whitlock said. “And as a result of that, you get some of the smartest people in the world in this one little centralized location.”

“We started down this path 13 years ago,” said Loudoun Department of Economic Development Executive Director Buddy Rizer, who has led the work to bring data centers to Loudoun. “We were the first jurisdiction, really anywhere, to proactively identify data centers as an opportunity for economic development.”

Loudoun’s data center market, the largest in the world, has also matured over time, as Data Center Alley has filled out, and as data centers have faced pushback when they have popped up near people’s homes.

“We’re being a little more particular, I guess, in our deals—where we want them, the kinds of deals we’re trying to get done, the way it kind of fits in with the rest of what we’ve got going in the county,” Rizer said. “So there are going to be a lot of opportunities for other communities for deals that probably aren’t right for Loudoun, either form a cost standpoint or from a vision standpoint anymore.”

In other words, he said, not every place in Loudoun is right for a data center. The department is currently working on a study of land where data centers can go, and places where they should make room for other businesses.

Ultimately, it may be the limited amount of land that caps Loudoun’s data center market.

“I think Ashburn itself is the only thing keeping it from continuously growing at the rate that it’s going,” Whitlock said. “Because if they sell out of land, it’s going to push you to Prince William. If the prices of the acreage keep going up, it’s going to drive people to Prince William.”

But he also said county leaders like Rizer and the Board of Supervisors “understand that they have a Super Bowl-caliber operation that they’re running, and I don’t think that they want to risk anything to disturb that.”

Rizer said Loudoun can’t take data centers for granted. While the campuses are massive, the equipment inside is replaced every few years, meaning the companies could conceivably leave in a matter of years if some other place replaced Ashburn as the place to be.

“When you are the number one of anything, you know that you’ve got to make sure that you’re working hard to keep it. We never want to take the industry for granted,” Rizer said. “…. It used to be, when we would have major announcement or we would say, ‘hey, Microsoft just bought more land in Loudoun, we’re going to have more data centers,’ it was a big story. Frankly, it’s more like normal business for us. Can you imagine how many communities in the country right now would be excited about having a billion-dollar investment in the community?”

Whitlock said for a company like Sabey, which also builds and owns its buildings, keeping real estate taxes low makes a difference. And Rizer said data centers need consistent, predictable permitting processes and taxes. Loudoun’s computer equipment tax rate, $4.20 per $100 of assessed value, has never budged. The tax rate on business tangible property was set at that rate in 1987.

“We have to make sure there are no surprises, because these businesses have to be able to project what their tax liability is going to be,” Rizer said.

If all that happens, they said, Loudoun will keep being “the best place in the world for data centers.”

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