REIT announces 1.5 million-square-foot data center expansion

Dive Brief:

QTS, a Overland Park, Kansas-based REIT focused on data centers, announced a 1.5 million-square-foot expansion to its data center campus in White Oak Technology Park in Henrico County, Virginia, according to a press release.

The add-on brings additional data center space to its already existing 1.4 million-square-foot data center next door. QTS bought the land from the Henrico Economic Development Authority in March for nearly $18 million, according to Richmond Biz Sense.

Migration to data center hubs outside of primary markets will likely increase in the coming years, as limited space and power availability threaten to increase costs in primary markets, according to a CBRE report on North America data center trends.

Dive Insight:

Relatively cheap land and power, coupled with record tax initiatives, have created favorable data center conditions outside of primary markets, and companies like QTS are taking advantage.

QTS data center campus benefits from its strategic location in the middle of the East Coast, access to renewable energy sources and low tax rates on computers and related equipment for data centers, according to the release.

The site sits five miles from Richmond Airport and 98 miles from Washington D.C., according to QTS. The Henrico Economic Development Authority says 18% of East Coast internet traffic currently goes through Henrico County, reports the Richmond Times-Dispatch.

Data center construction demand remains stronger than ever, but issues around labor, supply chain snarls and inflation could mute the pace of building in the sector. Mike Kuntz, executive vice president at Turner Construction, the largest commercial contractor in the U.S., said data center construction would take a much greater share of Turner’s portfolio if the company had access to unlimited labor and capacity.

“It could be 80% of our portfolio if we didn’t have the traditional chokeholds on labor and professional staff,” said Kuntz. “When we think about looking forward, it’s ‘how do we meet that demand?’”

Northern Virginia leads the U.S. in absorption, accounting for more than 60% of the national total, according to the CBRE report.

Through the first quarter of 2022, data center construction has boomed, according to Dodge data. Starts reached $1.4 billion during the first three months of 2022, a 29.2% increase from the first quarter of 2021.