Cloud Services Boosting Northern Virginia’s Data Center Market

JLL’s David Barnett details new report examining the segment

reprints


Skyrocketing demand for cloud technology has led to a strong interest in the data center market in 2021, and Northern Virginia is seeing some of the most activity, according to JLL’s recent Global Data Center Outlook for the first half of the year.

Spending on public cloud services is expected to grow 8.4 percent in 2021, reaching $4.1 trillion, according to information technology research firm Gartner. That means the need for data center space is only going to get bigger.

SEE ALSO: Trez Capital Expands Bridge Lending Business With UBS Hire

JLL’s report prominently highlighted the Northern Virginia region, which leads the country in both demand and construction activity. In fact, cloud services in NoVA accounted for 50 percent of the 119 megawatts of absorption in the first half of 2021.  

David Barnett, director, Americas research for JLL, spoke with Commercial Observer about why Northern Virginia is so popular in this segment.

Commercial Observer: Why are data centers on the rise?

David Barnett: There are a couple factors contributing to the growth of data centers. Pre-pandemic, adoption of cloud services boomed and continues to garner interest from a variety of enterprises. Cloud services adoption is compounded by the Internet of Things. Everyday life has been integrated into technology. Smart homes, smart cars, videogaming, and more demand increased computing power. 

Most recently, amid the pandemic, streaming services and virtual connectivity skyrocketed as employees, students, teachers, friends, and family adopted remote work and social distancing protocols. These services will continue to augment the world of work as economies reopen.

How has the hybrid workplace necessitated the need for more data center capacity?

Hybrid work demands virtual connectivity and streaming with colleagues. This additional computing power creates the need for data center capacity.

Why is Northern Virginia a big market for this? What about the area attracts data service companies?

As the largest market in the world, Northern Virginia has much to offer. The market boasts robust infrastructure and fiber connectivity. Its location on the East Coast and proximity to Washington, D.C., and other major markets is desirable. At the same time, rates are relatively low for users. 

What are we seeing with prices in the area, and how does NoVA compare to the rest of the country?

Prices in Northern Virginia have compressed and remain lower than other markets in the United States, making the market even more attractive to users. However, the market is becoming more land-constrained and pricing has reached record levels in Prince William and Loudoun counties.

What were the absorption figures for 2020, and what are we seeing in 2021?

In the first half of 2021, Northern Virginia recorded 119 megawatts of absorption. While this is below the 180 megawatts recorded in the first half of last year, this is still one of the highest levels on record. This demand is driven by social media companies, cloud services, and government.

What do you project for the next year in this segment? Will it remain strong?

The data center sector is poised for growth throughout the year, leading into 2022, due to rising interest in edge computing, 5G adoption and virtual connectivity services.

What is NoVA doing to prepare for the demand?

Northern Virginia’s construction pipeline is the largest in the United States at 339 megawatts. While building additional capacity is required for the market, its speed to market is just as important to meet robust demand.

Keith Loria can be reached at kloria@commercialobserver.com.