Northern Virginia leads the world in the data center market

Northern Virginia is by far the largest data center market in the world, according to a new Northern Virginia Technology Council (NVTC) report titled “The Impact of Data Centers on the State and Local Economies of Virginia.”

Data centers are centralized locations where computing and networking equipment is concentrated for the purpose of collecting, storing, processing, distributing or allowing access to large amounts of data. At present there are about 166 data centers in Northern Virginia, with about 27 located in Fairfax County and most of the rest in Loudoun and Prince William counties, according to Baxtel, a data center information site. In fact, Loudoun County brands its concentration of data centers as “Data Center Alley.”

“Proximity to a powerful infrastructure and boundless capacity of data centers, fiber cable connectivity provides a key benefit for all companies located in Northern Virginia and also attracts tech talent to the area,” said Victor Hoskins, president and CEO of the Fairfax County EDA. “The speed and volume of data today — really a revolution created by cloud computing — necessitates the proximity to data center infrastructure, and our companies benefit tremendously by being surrounded by this infrastructure and in fact the entire data ecosystem.”

Here are some of the key takeaways of the NVTC report, which was prepared by Mangum Economics and released in January.

Graphic courtesy: NVTC

  • Measured in megawatts (MW) of power capacity, Northern Virginia has almost as much data center inventory as the 2nd, 3rd, 4th and 5th largest markets (Dallas-Fort Worth, Silicon Valley, Chicago, and Phoenix) combined.
  • Northern Virginia’s place at the top of the data center market is a relatively recent development. In 2016, Northern Virginia supplanted the New York market as the largest data center market in the United States. In fact, the study notes, a 2011 report on the data center market in the U.S. contained only one mention of Virginia.
  • By 2018, seventy-five percent of the state of Virginia’s regional distribution of private sector data center employment was in Northern Virginia.

NVTC estimates that in 2018 the data center industry in Northern Virginia provided about:

  • 10,663 full-time-equivalent jobs
  • $1.6 billion in associated employee pay and benefits
  • $3.5 billion in economic output

Economic impact of the data center industry in Northern Virginia in 2018. Graphic courtesy: NVTC

NVTC also estimates that in 2018, data centers were directly and indirectly responsible for generating $600.1 million in state and local tax revenue in Virginia. In the Northern Virginia region, $460.5 million was state and local taxes were collected; and $587.5 million federal taxes; with total taxes collected exceeding $1 billion.

Between 2001 and 2018 the average annual private sector wage in the data center industry in Virginia grew from $61,310 to $126,050, a 106 percent increase. In comparison, over the same period average private wages across all industries in Virginia went from $36,525 to $57,846, an increase of 58 percent.

The report notes that Northern Virginia Community College (NOVA) has developed programs to help address the challenges that data centers in the area have meeting their staffing needs. Amazon Web Services has a paid apprenticeship program at NOVA. In December 2018, the program graduated its first students into full-time associate cloud consultant jobs with AWS.

NOVA also has a 2-year associate of applied science program to train data center operations technicians, the report says. The program includes lab training at a training data center that the state built on the NOVA-Loudoun Campus. The program started with 19 students in its first year, almost half of them have already found internships or full-time jobs in Northern Virginia data centers or full-time jobs with companies that work for data centers, according to the report.

This is the latest milestone in the development of Northern Virginia as a data hub, starting with the conception and funding of the ARPANET, precursor to the Internet, in Arlington, to creation of Internet backbone facilities first in Tysons and then Ashburn in Loudoun County, the rise of Internet service providers such as AOL, PSINet and UUNet in Fairfax and Loudoun counties, and the concentration of companies involved in data analytics, cloud computing and cybersecurity. Paul Ceruzzi documented the rise of Fairfax County and Northern Virginia as a data hub in his 2008 book, “Internet Alley: High Technology in Tysons Corner, 1945-2005 (MIT Press).

Virginia is one of 31 states that actively offer incentives to attract data centers to locate in their states, according to the report. A sales and use tax exemption is available to data centers that make a minimum new capital investment of $150 million and that create a minimum of 50 new jobs in a Virginia locality.

Last June, the report notes, Virginia’s Joint Legislative Audit and Review Commission found that 90 percent of the data center investment made by the companies that received the sales and use tax exemption would not have occurred in the state without the incentive. Instead, that 90 percent of data center investment would have occurred in states other than Virginia.

Click here to read “Impact of Data Centers on the State and Local Economies of Virginia.”