How NoVa’s Data Center Market Drives CRE Growth

WASHINGTON, DC–From 2010 to 2019, the Northern Virginia data center market will have grown by 115% in gross square feet and 316% in megawatts, according to JLL.

All told, supply will have increased from 9.7 million gross square feet to nearly 21 million gross square feet, while total megawatts will have jumped from 498 to 1,570. Northern Virginia, in short, shows no danger of losing its crown as the largest data center market globally.

In a new research note, JLL takes the measure of how this growth is impacting local commercial real estate. Not surprisingly, it is having a substantial impact. According to JLL:

Investor demand has soared.

Northern Virginia has attracted all eight major data center REITs. In total, those eight operators control 57% of the overall market from a gross square foot standpoint, and 53% of the overall market from a megawatts perspective.

Land values have doubled.

Loudoun County land pricing has increased from $525,000 per acre in 2015 to $1.3 million per acre in 2018, while land pricing in Prince William County has increased from $295,000 per acre in 2015 to $400,000 per acre in 2018.

Leading the Way

These trends will continue as Northern Virginia’s net absorption continues to boom, setting a record high every year since 2010. In 2017 alone, Northern Virginia accounted for 36% of the total U.S. absorption, JLL noted. It writes:

Those absorption levels could be just the beginning of a longer-term trend. Migration to the cloud across both the public and private sectors is the main growth driver, but we are still in the early stages of that migration. The global market revenue for cloud computing is predicted to increase to $390 billion in 2020, equating to 17% annualized growth over the next few years, which will continue to position the Northern Virginia data center market as a significant growth engine over both the short and long term.