Developers across parts of Northern Virginia are running into a powerful new competitor for land — data centers. Once the province of residential and retail builders, valuable parcels are now being snapped up by the tech giants behind the booming digital infrastructure economy, reshaping development plans and profit expectations across the region.
Last year, home builder Stanley Martin began noticing that land once destined for housing in Prince William County was suddenly out of reach. As The Wall Street Journal reported, one tract with rights for 250 residential units was sold instead to a data center developer for $31 million.
"That was how we first kind of got attuned to, maybe this shouldn't be housing," Stanley Martin CEO Steve Alloy told the Journal.
The trend highlights what commercial real estate attorney David Rubenstein calls a "dynamic of tension" between home builders and tech developers—a condition he says is largely specific to Northern Virginia.
Rubenstein, a shareholder at Polsinelli, told GlobeSt.com that most data center developers typically prefer sites "well away" from residential areas.
"What data centers bring to a community — not just substantial tax revenue, but meaningful infrastructure investment," he said. This can shift the balance of local land use decisions.
However, as others note, when data centers do enter contested markets, their deep pockets and the tax revenue they promise make it difficult for traditional developers to compete.
In Loudoun County's well-known "Data Center Alley," that shift is already fully underway. In January, Jonathan Hipp, principal and head of Avison Young's U.S. net lease group and Richard Murphy, the firm's senior vice president of capital markets, oversaw the $100 million sale of 84 acres of farmland. Hipp estimated that the price was roughly ten times what the land might have fetched as unimproved agricultural property.
"It's got to push the cost of all land," said Hipp, who lives in the area. "You may have to go further out. Rents are set by land cost. At some point, it will be harder for developers to do a retail project if you can't support it with tenants that can pay it."
Rubenstein notes that such pressures aren't yet widespread.
"Data centers require a very specific convergence of factors: fiber infrastructure, significant power capacity, appropriate zoning, et cetera," he said. But artificial intelligence is creating new demand for massive data processing facilities and developers are likely to broaden their search for suitable sites.
According to Hipp, most communities will welcome them.
"They like it because it creates tax dollars, and it doesn't impact their other services," he said. "There isn't need for another high school or road improvement."
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