Sector Continuing to Flourish Despite Challenges
Two counties in Virginia are fighting over the right to call themselves the “data center capital of the world.”
The title has been – unofficially – held by Virginia’s Loudon County, which boasts more than 160 data center buildings with a combined floor space of 31-million square feet – roughly equivalent to the square footage of New York City’s Central Park.
But there’s a new challenger to the throne.
Prince William County, which sits less than an hour south of Loudon, currently has around 44 data centers totaling 8.3 million square feet. However, according to a report in the Prince William Times, if you count what’s currently under construction and being considered for approval by local authorities, the county could soon have more than 80 million square feet of data center space.
Prince William has been able to attract companies like Amazon, Google and Facebook to construct data center campuses within its boundaries largely thanks to the creation of its data center opportunity zone overlay district (DCOZOD).
Development of data centers in the opportunity zone is expedited thanks to the parcels already being zoned for industrial projects and having infrastructure already in place to support the massive requirements of these facilities. And investors in projects developed in opportunity zones – the DCOZOD or otherwise – receive tax breaks to further incentivize them to build in these areas.
In recent months, local elected officials in Prince William have approved plans that will expand the DCOZD into the middle of the county, as they look to capitalize on the United States’ ever-expanding data center needs.
“We’re on the cusp of becoming the biggest data center locality in the world,” said Corey Stewart, a former chair of the Prince William County Board of Supervisors and a lawyer who now represents landowners seeking to have their property rezoned for data center development. “...The latest and greatest technologies are being used here.”
While Virginia can rightfully say it’s a hotspot for data center construction in the U.S., it’s not the only area in the country that can make this boast. Silicon Valley, Dallas, Chicago and Phoenix have also been favored for this type of development due to their relatively low energy costs, favorable climate for natural cooling, and robust connectivity infrastructure.
As concerns over data usage continue to grow in our ever-connected world, so too will the need for more and more data centers. But concerns, including the sustainability of these buildings, the power they require to operate, and the resources necessary to build them, will have to be addressed if today’s construction trends are going to continue into tomorrow.
Growing at an Unmatched Scale
A data center is a building that houses the computing and storage resources an organization needs to enable the delivery of shared applications and data. Smaller organizations can house this equipment in a room of one of their existing buildings; larger entities, however, utilize multiple centers dedicated solely to meeting their data storage and sharing needs.
The boom in data center construction in the U.S. can be traced back to the COVID-19 pandemic. With most Americans stuck at home and forced to order everything online, everyone from Amazon to Walmart was forced to increase their data processing power.
Post-pandemic, the trend has continued. Coldwell Banker Richard Ellis (CBRE), the world’s largest commercial real estate services and investment firm, said in its latest North American Data Center Trends Report that an all-time high 2,287.6 megawatts (MW) of construction occurred in primary markets across the globe in 2023. Megawatts are the metric for measuring the power capacity provided by a data center.
“Data center construction is at an all-time high, driven by strong demand from all users, including AI, hyperscale and enterprise,” CBRE’s Executive Managing Director for Data Centers Solutions, Pat Lynch, told the Building Design + Construction Network. “New and existing uses of artificial intelligence cases grew tremendously in the first half of the year, and we expect demand to remain strong with AI driving leasing opportunities in the second half of the year.”
There are more data centers in the U.S. than in any other country on Earth – and it’s not even close.
As of March 2024, there were 5,381 data centers operating in the U.S., according to data from Statista.com. Germany has the second-most data centers of any country in the world – with just 521. China and India, the first and second most populous countries in the world, respectively, have just 612 data centers combined.
More Power Needed
It takes a lot of power to fuel America’s ever-growing arsenal of data centers. And our aging grid is starting to show the strain.
America’s energy infrastructure received a C- in the American Society of Civil Engineers’ most recent Infrastructure Report Card.
The biggest concern is reliability.
“The exponential growth of data centers with a tremendous appetite for electricity rapidly is outpacing the capacity of utilities to meet their needs,” writes Jack Rogers on Globest.com. “Pushing data center developers to prioritize new markets where they can be sure they can hook up to the grid.”
This is not just an American issue.
The International Energy Agency recently released its 2024 Electricity Report, which analyzes and forecasts the world’s electricity needs through 2026. The report highlights the data center sector’s impact on electricity consumption, positing that its global electricity demand could double towards 2026.
“We estimate that data centres, cryptocurrencies, and artificial intelligence (AI) consumed about 460 TWh of electricity worldwide in 2022, almost 2% of total global electricity demand,” the IEA wrote. “Data centres are a critical part of the infrastructure that supports digitalisation along with the electricity infrastructure that powers them. The ever-growing quantity of digital data requires an expansion and evolution of data centres to process and store it.”
The report goes on to explain that there are two main processes accounting for data centers’ electricity demands; computing and cooling each account for about 40% of the demand, while the remaining 20% comes from other associated IT equipment.
“Future trends of the data centre sector are complex to navigate, as technological advancements and digital services evolve rapidly,” the IEA continued. “Depending on the pace of deployment, range of efficiency improvements as well as artificial intelligence and cryptocurrency trends, we expect global electricity consumption of data centres, cryptocurrencies and artificial intelligence to range between 620-1,050 TWh in 2026, with our base case for demand at just over 800 TWh – up from 460 TWh in 2022...”
The data center industry is exploring solutions to its power needs, including investing in renewable energy. Data from S&P Global shows that U.S. wind and solar capacity contracted to data center providers and customers jumped 50% year over year as of early 2023, to more than 40 gigawatts.
Another potential solution to data centers’ power needs is being explored in West Texas, where Lancium, an energy and data center management firm, is building data centers close to power generating sites in a bet that this will allow them to tap into underused clean power. If their plan works, it could shift where in the U.S. developers prioritize building new data centers.
“It’s a land grab,” Lancium President Ali Fenn told The New York Times in a February 2024 article.
In lieu of building from scratch, data center developers are increasingly turning to adaptive reuse to build the facilities their clients need quicker, with fewer materials, and with a smaller initial carbon footprint.
The challenge with adapting an existing structure to serve as a data center is that unlike building from the ground-up, there’s no one-size-fits-all strategy that a developer can implement.
Rehabbing an abandoned mall is a very different task than retrofitting a disused warehouse. Some adaptive reuse projects may be able to take advantage of the existing infrastructure of the building, while others may need to start over with new power distribution, cooling, and related systems. There may be historic preservation requirements, re-zoning issues, or other hurdles that need to be overcome.
“[Adapting an existing structure into a data center] will require more collaboration between owners, engineers, architects, and contractors to ensure that all requirements can be satisfied within the existing structure,” wrote David Hart of MOCA Systems, Inc. in a piece for Data Center Knowledge. “Identifying and communicating anticipated obstacles early fosters the stakeholder alignment needed to prevent budget overruns, schedule slips, and unfulfilled owner expectations.”
A Bright Future
The importance of data centers to an organization’s operations cannot be overstated.
Kasey Kearcher of Ground Penetrating Radar Systems recalled a conversation with a facility manager at a data center for a major bank in the Mountain Region. The bank has over 100 branches across multiple states and requires two data centers to service those facilities.
In the scope of GPRS’ work for the bank, Kearcher inquired what would happen should the data center suffer a power outage.
“If they have a shut down, if that data center shuts down for any reason, it costs the bank half-a-million-dollars per minute,” Kearcher explained. “All the banking locations are reliant on this facility, so if there’s ever a utility line strike, or if they have a water line leak and that spills onto any of the equipment, that could be expensive and catastrophic.”
Despite questions about power usage and other challenges, the data center construction boom is only expected to continue.
Google has invested billions in data center expansion over the past few years, including its recent announcement that it will build a $1 billion data center campus in Kansas City, Missouri. Amazon paid $152 million to acquire 140 acres in Prince William County’s Data Center Opportunity Zone Overlay District and are exploring the possibility of construction data center locations there. And Microsoft is already building a data center campus in the area with plans for it to be up and running by mid-2024.
“The demand for data centers is expected to surge in the coming years as the world becomes increasingly interconnected,” The Birmingham Group’s President and CEO, Brian Binke, wrote in a blog post last fall. “With companies like Google, Amazon and Facebook leading the charge, data center construction will continue to thrive, supporting the digital infrastructure needed for a connected future.”
