Virginia lawmakers have proposed a wave of laws to limit knowledge heart improvement throughout the Commonwealth, injecting new uncertainty right into a market that, whereas remaining the world’s most essential knowledge heart hub, is evolving into more and more difficult terrain for builders.
For the reason that starting of the yr, greater than one dozen separate items of laws meant to restrict the place and the way knowledge facilities are constructed and operated have been filed throughout Virginia at each the county and state ranges.
Whereas it’s attainable that none of those payments will ever grow to be regulation, the rising quantity of proposed laws displays the more and more hostile political panorama knowledge facilities face in Northern Virginia. A dwindling provide of developable land and out there energy from utilities has already made large-scale knowledge heart tasks within the area more difficult than ever.
The added potential for brand spanking new hurdles and restrictions and the instantly unsure regulatory panorama might have builders on the lookout for greener pastures.
“It isn’t going to cease the information facilities from coming, however it is going to make it tougher,” Jennifer Reininger, Senior Improvement Supervisor at Yondr Group, mentioned at Bisnow’s Nationwide Information Heart Development, Design and Improvement summit final month. “You’re going to need to get slightly extra inventive, and also you’re going to need to just be sure you are reaching out to those native communities.”
With Virginia on the heart of a world knowledge heart constructing increase, county governments are contemplating zoning modifications to present themselves extra management over the place these amenities may be sited. Even Loudoun County, dwelling of “Information Heart Alley” and regarded the hub of the digital infrastructure universe, is contemplating eliminating by-right zoning for knowledge facilities solely.
On the state stage, legislators from knowledge heart improvement hotspots have launched a barrage of payments that might do every thing from banning diesel backup mills and prohibiting tasks close to historic areas to mandating builders disclose their energy and water consumption.
In February, Loudoun County’s Board of Supervisors raised eyebrows throughout the information heart sector by voting to discover zoning changes that might give county officers way more management over the place and the way knowledge facilities are constructed.
Probably the most vital change being thought-about is the elimination of all by-right zoning for knowledge facilities. Which means each knowledge heart challenge would must be individually authorized by county lawmakers, successfully stripping entitlements from properties zoned for knowledge facilities which have fetched big premiums from builders.
Though Loudoun’s political local weather over the previous 20 years has been famously pleasant in the direction of the information heart trade, the political will to additional regulate knowledge heart improvement has grown steadily lately because the market has grow to be saturated.
Nonetheless, the proposed zoning modifications took the trade abruptly. They have been additionally a shock to the county’s personal financial improvement workers, which had not been knowledgeable in regards to the deliberate revision course of forward of time.
The method of rewriting knowledge heart zoning is predicted to take a minimum of 15 months, county officers say. However each trade insiders and a few Loudoun officers say simply launching the method sends an instantaneous message to builders that new knowledge heart tasks can be met with skepticism by a crucial mass of native politicians.
“We must be cautious,” Loudoun Supervisor Caleb A. Kershner told the board final month. “The concept that we’re going to micromanage this entire course of sends a message to the information heart trade that they’re not wished.”
Loudoun’s zoning invoice got here simply two months after comparable measures to restrict knowledge heart progress have been handed in neighboring Fauquier County. The Fauquier Instances called the wide-ranging laws and improvement pointers “one of many “strictest in Northern Virginia—and presumably the whole state.” Lawmakers in Stafford and Fairfax counties are additionally contemplating enacting comparable guidelines to handle knowledge heart buildout.
A rising variety of state lawmakers have additionally set their sights on the information heart trade, with 13 totally different knowledge center-focused payments filed in Richmond for the reason that begin of the yr throughout the legislative time period that concluded Saturday.
The laws setting off the loudest alarm bells inside the knowledge heart trade is a Home bill filed by Fairfax County Delegate Rip Sullivan that might require knowledge facilities to satisfy a selected energy-efficiency customary to be eligible for a state tax exemption that’s crucial for nearly each knowledge heart challenge in Virginia.
Whereas consultants say the mandated effectivity benchmarks can be troublesome for a lot of knowledge facilities to satisfy, concern from builders has centered round language within the invoice that might successfully ban diesel backup mills – an integral ingredient of a mission crucial knowledge heart that presently has no extensively out there different. Banning diesel mills, trade insiders say, will successfully pressure builders to construct elsewhere.
“It’s slightly scary,” mentioned Jim McDonald, co-founder of information heart generator provider Miratech. “Mainly, it is outlawing diesels on web site … so there’s going to be pushback on that.”
Consideration of the Sullivan invoice, together with the majority of the information center-focused laws proposed for the reason that begin of the yr, has been postponed till the 2025 legislative session. The timeline is supposed to coincide with the publication of a report by the Normal Meeting’s Joint Legislative Audit and Evaluation Fee on the general influence of the information heart trade in Virginia and state and native insurance policies that have an effect on it. Lawmakers reportedly need selections on knowledge heart regulation to learn by this research.
Different bills punted to 2025 suggest a spread of latest limitations and necessities for knowledge heart builders or the municipalities the place such tasks have been proposed. These embody measures to make sure that data centers aren’t driving up utility prices for different ratepayers, mandating disclosure of data centers’ water and power consumption and inserting limits on how close data centers can be built to parks and locations of historic and cultural significance.
Even when just some or none of those legal guidelines come to fruition, the uncertainty created by the pending laws is altering the maths for builders relating to siting tasks in Northern Virginia.
In an trade with large upfront capital necessities and improvement timelines that span the higher a part of a decade, knowledge heart companies are extra inclined to shrink back from markets the place they need to navigate a regulatory panorama that’s shifting below their toes.
Bisnow/Jon Banister
Northern Virginia knowledge heart opponents protest exterior of Bisnow’s DICE East occasion in Tysons in 2022.
“Certainty is extremely essential for all companies,” mentioned Josh Levi, president of the Information Heart Coalition, an trade advocacy group. “However given the magnitude of capital funding with this trade, long run planning goes to be a differentiator in markets.”
This uncertainty is prone to have an instantaneous influence on land values in Loudoun County, the place builders have been prepared to pay big premiums for parcels that permit knowledge facilities by-right. Now, Loudoun County Financial Improvement Government Director Buddy Rizer acknowledges that knowledge heart companies are unlikely to shell out big sums for entitled land when these entitlements may very well be stripped away inside two years.
‘I’ve all the time mentioned that the largest enemy of enterprise is not competitors, it is uncertainty,” Rizer mentioned. “It’s now making main investments within the county difficult. We’re working to scale back the uncertainty that’s inherent in any main legislative course of like those we’re going via.”
The flood of proposed regulation additionally displays a shifting political local weather for knowledge facilities in Virginia, because the once-obscure trade more and more finds itself on the heart of political debate and public scrutiny in elements of the state.
Unsurprisingly, every bit of information heart laws filed this yr was launched by lawmakers representing elements of Loudoun, Prince William and Fairfax counties with the best densities of information facilities or the place digital infrastructure improvement has exploded up to now 24 months.
Because the rising variety of large-scale knowledge heart tasks have generated backlash from residents, these counties have seen knowledge heart improvement emerge as an above-the-fold political concern that may transfer the needle in native elections.
This dynamic has performed out most prominently in Prince William County, the place a large knowledge heart improvement space often known as the PW Digital Gateway is slated to show a largely rural and residential space close to the Manassas Nationwide Battlefield into the world’s largest knowledge heart hall. The challenge sparked passionate and arranged opposition, changing into the central concern in native elections that noticed incumbents supportive of the Digital Gateway ousted by vocal knowledge heart opponents.
As Bisnow has reported beforehand, this hostility has been one thing of a impolite awakening for knowledge heart builders, who till just lately confronted little public scrutiny and have been usually welcomed with open arms by municipalities anticipating the tax income these buildings usually deliver with them.
“5 years in the past, we had counties bidding towards one another to deliver us in,” Yondr’s Reininger mentioned. “It wasn’t simply tax incentives, typically they have been providing to construct us a substation. However issues are altering, and communities aren’t proud of knowledge facilities coming in and taking on.”
As an entire, the information heart trade has been gradual to react to those shifting political winds, with builders routinely struggling to navigate the more and more hostile panorama in key markets. However most of the trade’s largest gamers have begun altering their strategy in latest months, pouring extra assets into political advocacy and different efforts to win hearts and minds. Advocacy teams just like the Information Heart Coalition have scaled up and added workers.
However the Information Heart Coalition’s Levi insists it will be significant for the trade to interact with lawmakers at each the native and state ranges proactively and never on a project-by-project foundation. The info heart enterprise is difficult, and Levi says it’s essential to assist lawmakers perceive what’s driving builders’ decision-making earlier than they’re confronted with a challenge that pulls pushback from their constituents.
“This trade must do a greater job of speaking about what it does, the way it does, why it does and the place it does,” Levi mentioned. “That requires alignment and a consensus voice, and that is actually the place we’re leaning in proper now.”
