The Harmonic Rise of Data Centers

Data centers are visible proof of the size and scope of our digital footprints. The location of these buildings is integral to our seamless access to digital data, though this is easy to forget each time a password is stored, an AI chatbot is queried, or another photo is saved. The expectation we place on their critical contribution to our way of life is juxtaposed by controversy over the rapid growth in their development.

When recent opinions and backlash in Northern Virginia began to hinder progress in the established data center market, other counties in Virginia took notice. Make no mistake, when properly planned, data centers can and are part of sustainable, responsible economic growth. Coupled with market conditions that demand their proliferation to meet the insatiable demand from their tenants, it can be a win-win for counties looking to drive substantial tax revenue to the bottom line. King George County’s new Dahlgren West data center campus embodies this approach, offering an instructive case study in harmonizing development with community priorities.

Dahlgren West: Minimum Development Impact, Maximum Community Return

Support for Dahlgren West started with a family deeply rooted in the area with the desire to preserve the rural character of King George County and lay the foundation for a sustainable fiscal future. The family, who had served the community for decades as volunteers in local civic groups, active service members, and civilian employees working at nearby Dahlgren Naval Base, wished to see their land benefit the community’s future generations.

They were also aware of how the competing priorities of a thriving rural community beg the ever-present question: Can sustainable economic development be achieved without sacrificing open spaces to sprawling residential or retail uses? They found the answer when the team at Oasis Digital Properties came knocking.

Oasis Digital was founded on the principle that data centers can be thoughtfully sited, developed, and delivered in a way that benefits communities well beyond other types of real estate. Partnering on this project allowed Oasis to pursue this thesis in markets outside of Northern Virginia.

Proposing a 500-acre data center campus in a rural community that receives approval from the Planning Commission and a unanimous vote by the Board of Supervisors requires a thoughtful, thorough, and participatory development plan. One that is supported by clear market analysis, economic impact studies, and fiscal and financial planning. Anecdotally, data centers draw very little from public services while contributing much to public tax coffers – but how to illustrate this? Oasis called in the Cavalry.

King George County is about 60 miles southeast of Loudoun County’s Data Center Alley, as the crow flies. In 2023 it established a dedicated technology zone, Article XI, Sec. 14-245, to incentivize private entities to invest in designated areas. Dahlgren West is entirely situated within this zone and has existing 230kV transmission lines onsite, derisking power supply, and speeding up the large load power delivery required for data centers. This created a near-perfect location for large-scale data center development. Even so, the entitlement process took 2 years, which included multiple rounds of community meetings followed by a formal rezoning application. The 500-acre site was ultimately approved for up to 7,000,000 square feet of data center improvements meaning more than $20 billion of capital investment over 15 years.

Cavalry Delivers: Fiscal Analysis, Economic Impact, Market Study

Forecasting the fiscal impact of any development requires a deep understanding of how tax revenue is generated by the jurisdiction – specifically the impact of construction milestones. With a property as large and distinct as the Dahlgren West campus, the realization of tax revenue can come in fits and starts, as entitlement and zoning are finalized, construction commences and completes, and data center equipment is installed, refreshed, and replaced. Layer on the nuances of real property tax versus personal property tax, and you have a complex forecast.

Negotiating proffers, from cash contributions to construction and design commitments, requires mediation skills as well as an understanding of the community needs and regulatory requirements. These can include zoning, environmental, energy, and transportation at the site, and public safety, community amenities, and workforce training to benefit the surrounding areas. The complete economic impact study that Cavalry completed for Dahlgren West considered all these factors to illustrate the value the project will bring to the community, now and in the future.

Any local elected body and respective boards and commissions in an approval process want to know “what is this development worth and what benefits does it bring?” With Dahlgren being a trailblazer project in this part of Virginia, a detailed market study was needed to understand its worth relative to more mature markets. There are a variety of reasons it’s necessary to know the value at each phase of a project, especially when the subject property is in an emerging market and is undergoing entitlement changes. For one, a successful development is going to attract potential investors, and any offer needs to be evaluated by diving deep into sales comparables and research. And sales price, realized or expected, will influence property tax assessment values, which, as noted earlier, are an integral factor in calculating fiscal impact.

Data Center Lessons in Whiskey Warehouses?

In a witty way, data centers have parallels with Kentucky’s iconic bourbon warehouses. Bourbon boomed in Kentucky hundreds of years ago for geographic and political reasons, not dissimilar to why Northern Virginia booms with data centers today. But the rest of the country took notice and started producing stellar competition.

The data centers of Dahlgren and the rickhouses in Bardstown are both collections of remote buildings, fulfilling our indulgences and uplifting the economic welfare of their communities. And so, while the future of growth in Data Center Alley is unclear, neighboring counties and states are leaning in, learning from Northern Virginia. Wanting to harness the habits of their residents as a bolster to their economies. Now that’s harmony.

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