NoVA Remains King of Data Center Development: Report

Data center development continued at a remarkable clip throughout the first half of this year, with the Northern Virginia market still the reigning champ, and by far.

The current supply of U.S. co-location data centers — wherein companies rent space at third-party facilities to house their servers — reached a power capacity of 12 gigawatts by midyear, including 1.3 gigawatts delivered so far this year alone, according to a new market analysis by JLL (JLL). One gigawatt is enough to power roughly 750,000 homes.

Northern Virginia unsurprisingly led the pack in completions in the first half of this year, with new facilities totaling 519 megawatts of capacity. Those deliveries keep the region’s capacity at four times that of Dallas-Ft. Worth, its closest market rival.

Roughly 5.8 gigawatts worth of data centers are planned for development in NoVA, more than double the region’s current capacity, though just 638 megawatts worth are actually under construction at the moment, per the report.  That figure places the region in fifth place in terms of active construction, behind Atlanta, Chicago, Phoenix and Northern California. 

Northern Virginia’s proximity to Washington, D.C., and the region’s robust fiber network will continue making it attractive to developers and users for the foreseeable future, yet rising prices, recent public and legislative backlash and fierce competition for space could complicate matters.

The availability rate for market-ready data centers, for example, has hovered around just 1 percent over the past 10 consecutive quarters, according to JLL, while new properties set to deliver in 2025 and 2026 are already 88 percent pre-leased. 

Loudoun and Fairfax counties in recent months have also advanced or enacted restrictions on where and how data centers can be built within their localities, with the former removing data centers as a by-right use, and the latter mandating that the facilities be built a certain distance from residential communities to better protect those communities from noise. 

Co-location pricing rates in Northern Virginia have risen by 36 percent since 2023, per the JLL report, likely as a result of those factors.

Yet the report’s research author, Andrew Batson, argues that the sheer scale of NoVA’s data center market and the amount of projects under development mean that a new market champ won’t be crowned anytime soon. 

“While the total capacity under construction declined [in NoVA] at midyear, that will likely turn out to be a momentary blip,” Batson told Commercial Observer. “NoVA has the largest pipeline of projects among all markets in the U.S. at 5.9 gigawatts. The boundaries of what we consider the NoVa market will continue to expand to accommodate additional development, and the region will continue to benefit from a multitude of competitive advantages as the largest data center ecosystem in the world. The data center sector is growing at such a rapid pace that it is not a zero-sum game. All markets will see rising development levels, including NoVa.”

To Batson’s point, data center vacancy is a hot commodity these days, with average co-location vacancy currently at a record low of just 3 percent, and the rate has trended downward since at least the first half of 2020. With sky-high demand and concurrently high pre-lease rates, average vacancy is expected to continue trending toward zero for the foreseeable future, per the report. 

Nick Trombola can be reached at ntrombola@commercialobserver.com.