Land: A Shrinking Resource?

The amount of land available to us is finite and we need to carefully manage how the land is deployed for the many things around us. This has led to the development of land use plans for cities across the U.S., and with the explosion of data this now includes adjustments for more land devoted to data centers. Some areas are already thick with data centers with Ashburn, Virginia being the densest and growing denser every year.

Yet just because data centers are abundant in a region does not mean there isn’t space to grow. Even in Northern Virginia the number of data centers could double before land for them was exhausted. In many markets the space shortage causes land prices to increase steadily as the better land choices shrink; this trend will more than likely continue in the future as all types of buildings, infrastructure, and more are developed in existing and new spaces around hubs and cities to provide for the local growing needs.

Land for data centers also follows the number one rule in real estate for nearly a century: location, location, location. In some places land has been advertised as free, as there are enough incentives from the local jurisdictions to offset the land cost. Other locations just outside of fiber-rich areas are growing as well, with the land prices at about half of that for a location just a few miles away; in Ashburn, Virginia the prices have steadily creeped upward but thus far few data center owners are willing to spend $2 million per acre just for the proximity. Most have learned that the surrounding locations in Northern Virginia are quite close enough with average land prices closer to less than $500,000. Around the nation counties have followed what brings a data center to their town and land is one of the incentives brokered to sweeten the lure for owners.

Instead of land being scarce, the driving factor is a perceived shortage of the preferred locations for data centers – the sites that have everything on the data center wish list: enough ready land; inexpensive power; water for cooling; fiber density; tax incentives; services; plentiful workforce; and more. And this shortage of premium locations with enough land to develop a new data center creates the desire to increase density or explore going up.

Leave a Reply

Your email address will not be published. Required fields are marked *