Sales  ·  Analysis

Northern Virginia Sees Record Demand for Data Centers

AI boom is fueling next-level demand for data center product

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Northern Virginia achieved its fourth straight year of record demand for data centers, according to JLL’s North American Data Center Report.  

NoVA maintained its place at the top of all U.S. markets, with 1.6 gigawatts (GW) of transaction volume on deliveries expected in the next three years based on power availability. The region saw 581 megawatts (MW) of net absorption in energized product last year, reaching a new high-water mark. By comparison, the second-largest market of Northern California had a net absorption of 183 MW, with Santa Clara, Sacramento and Sunnyvale among the most desirable areas. 

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Rents are also climbing, reaching as much as $300 a square foot, more than 20 percent above the highs of 2022.

The power capacity in the region utilized by data centers more than doubled between 2018 and 2022 to 2,767 MW, according to Dominion Energy, Virginia’s electric utility.

JLL predicted that the capacity is expected to double again by 2028, and two 500 kilovolt (kV) transmission lines are currently in the works, which will help meet the electricity demand of the data center market.

One reason for such an increased demand for data centers in the U.S. is the dramatic rise of generative artificial intelligence (AI), which requires power on a scale not seen before, —as much as 300 to 500 MW, according to the JLL report.

With tech giants like Microsoft, Facebook and Google all investing more in AI, and services like OpenAI and ChatGPT garnering hundreds of millions queries each day, the demand is expected to get even greater. AI is already benefiting the office market, as well.

But with few data center leases available in Northern Virginia, according to JLL’s report, it’s no surprise that companies are buying up land with plans to build more centers.

This was the case last week, when Microsoft acquired 124 acres in Gainesville, Va., for $465 million from notable data center entrepreneur Chuck Kuhn of JK Land Holdings, the Washington Business Journal reported. (Requests for confirmation from Microsoft and the seller were not immediately returned.)

Kuhn purchased the land for $46.8 million just four years prior, according to public records.   

The land parcels, located at 13490 University Boulevard and 5941 Wellington Road, are zoned for data center development as they are within Prince William County’s Data Center Opportunity Zone Overlay District, formed to promote the development of data centers.

A rezoning application submitted by Kuhn in 2023, seeking a larger density allowance of approximately 3.8 million square feet of data center uses and a new substation, is currently pending, according to the WBJ.

Available data center spaces greater than 1 MW are seeing record demand, according to JLL’s report, with sites in Prince William and Loudoun counties trading at record prices. In 2023, 1.9 GW of multitenant data center inventory and an additional 2 GW of single-tenant inventory were delivered.

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