Virginia's Loudoun County powers the data center market

NOTE: This story first appeared on GCN.com.

With 70 percent of the world’s internet traffic passing through the 10 million square feet of data centers situated in Loudoun County, it’s tempting to say that they put the Northern Virginia district on the map. But Buddy Rizer, executive director of the county’s Economic Development Department, might give AOL credit for that.

“It goes back to the late ’90s when AOL moved its corporate headquarters here,” Rizer said. “That was followed by [MCI-WorldCom]. What happened was everybody started running their fiber out to AOL, because in those days AOL was the internet and the internet was AOL for most people.”

Internet providers ultimately built an exchange point there known as MAE-East -- one of four U.S. Network Access Points as designated by the National Science Foundation.

“Those traffic centers were becoming more and more congested, and they were actually owned by carriers, so there were questions about how partial they were in terms of allowing traffic to continue to grow and expand,” said Jon Lin, vice president of corporate development and strategy for the Americas at Equinix, a global data center provider that opened its first location in Loudoun in 1998 to be a neutral steward of the infrastructure aggregation points.

From there, data center growth happened organically until about 10 years ago, when the county began proactively working to attract them, Rizer said. In 2014, Loudoun’s Board of Supervisors approved the Data Center Zoning Ordinance, which added data centers as a permitted use to districts zoned as commercial light industry or planned development of an office park, research and development park, industrial park or general industry.

The county also began offering the Fast-Track Commercial Incentive Program, which speeds the time to market for data center operators by providing a dedicated project manager from the department and moving the project to the top of development review lists. It also offers sales and use tax exemptions to data centers that invest at least $150 million, hire at least 50 employees, pay at least 1.5 times the average local wage and enter into a memorandum of understanding with the Virginia Economic Development Partnership.

“The tax incentives are nice, but overall they’re just part of the package,” Lin said. “Once all the connectivity was there, all the content providers seemed to be there and now all the cloud service providers are again using all of that bandwidth and connectivity. That’s really how Loudoun became the data center hub for the U.S.”

Equinix has more than 200 centers worldwide, about 11 of them in Loudoun. When it’s looking to expand, Lin considers factors such as proximity to population centers, bandwidth, fiber routes and subsea cable landing spots -- requirements Loudoun easily fills. And although the county has the largest concentration of data centers in the world, Lin isn’t worried about manmade or natural disasters affecting the area. 

“From an overall geographical risk perspective, Loudoun County is also quite nice. It’s got low seismic risk; it’s pretty far away from the water [with] no real flood risk,” he said. “Our customers are expecting us to be in locations that help them solve their application latency issues and performance challenges on the applications side so that they’re getting the best end-user performance.”

For the county, the data center industry has helped grow the population from about 80,000 in those early AOL days to 400,000 now. It’s also created a job boom; the county added 10,000 jobs – mostly in tech – in the past three years, Rizer said.

But taxes benefits are the biggest reward the 520-square-mile county reaps from what Rizer dubs its “cottage industry.”

“We’ll get about a quarter of a billion dollars in local tax revenue this year alone from the data center industry,” he said. “Data centers are a really high return on investment for us. For every $1 we spend on services for data centers, we get $9.50 back.”

By comparison, it costs the county more to provide services to single-family homes than it gets back, and for every $1 it spends on commercial businesses, it gets about $1.56 back. With an estimated median household income of $134,464 in 2016, according to the U.S. Census Bureau, Loudoun is the wealthiest county in the country.

And it’s not done growing. Loudoun has another approximately 5 million square feet of data centers in planning or under development. In February, Amazon Web Services submitted a plan to build a 600,000-square-foot data center on 44 acres near Dulles International Airport.

With data centers consuming about 100 billion kilowatt-hours of electricity -- 2 percent of all U.S. electricity use  in 2013, according to the Energy Department -- the county has been careful to work with local utility company Dominion Energy to keep power flowing.

“We don’t see that as a limiting factor at all going forward,” Rizer said. “Land would probably be our biggest limiting factor. We expect that we’ll have organic growth through the early 2020s, but at that point, we’ll probably be out of data center land.”

As a result, his department is looking to attract other businesses – especially those that can take advantage of the tech-savvy workforce and infrastructure in place.

“Just like a business doesn’t want to be too dependent on one product line, we want a diverse economy here,” Rizer said.

Other data center hubs include London, Europe’s largest; Singapore, which is Asia Pacific’s data center capital; and Beijing, according to an August Data Center Dynamics report. It adds that determining factors include climate, local economy, proximity to consumers, availability of power and networking connections, and politics.

“I think the thing that we did better than anybody else is we worked to understand data centers and worked to create an environment where they could come and thrive,” Rizer said. “All we did was enable. We set up the table for success and the companies reacted to that…. It has worked out incredibly well for us.”