“The tech giant and other firms are evaluating ways to transform vacant office space for new uses.”

Why this is important: Ashburn, Virginia, an unincorporated locale in Loudoun County, is the home to one of the internet nodes that make the internet work, with nearly 70 percent of all internet traffic in the world passing through Ashburn. Because of its unique locational advantage, Loudoun County has dozens of data centers. Because data centers are so capital-intensive and personal property tax in Virginia is based on depreciated original cost of the property, Loudoun County collects millions in taxes from these facilities. In fact, in recent years, the total taxes collected neared 25 percent of the general fund budget of the county. Even taking into account that the general fund budget is just a subset of a much larger budget, this is still a huge positive budgetary impact for a locality.

However, these facilities can represent a mixed bag from the planning perspective. While the capital investment from the owner is huge and therefore the taxes paid go a long way toward supporting local budgets, converting office space to data centers, as is proposed in Loudoun, presents several problems. First, data centers, when they catch on fire, burn hot, meaning that fire departments need new equipment and training to be prepared, and office areas are clustered, meaning that gaining control quickly is extremely important. Second, offices mean employment, usually well-compensated employment. Data centers typically do not employ many people. Replacing office space with a data center with a comparable physical footprint inevitably means layoffs or relocations. Third, the utility impacts are outsized. While more and more data centers use air cooling, many still use water cooling, which can use hundreds of thousands of gallons per day. While this supports the budgets of water utilities, it also stretches their raw water sources—particularly in drought conditions. Luckily Virginia has not experienced a serious drought in nearly two decades, but in an era of climate change, it is difficult to predict when the next one might be. They also use truly vast amounts of electricity. This means that electric utilities need to find additional support for their base load, extend unsightly high-tension lines, and build large substations. These spinoff impacts to the aesthetics of our neighborhoods make a huge difference to communities.

As the need for data storage and processing continues to expand exponentially and the office space market continues to be soft due to increased corporate work-from-home policies, it is going to be attractive for owners of underperforming office properties to convert them to data center space. It is also going to become more attractive to spread out companies’ footprints. For instance, Henrico County, outside of Richmond, is planning ahead for future data centers. In Hampton Roads, the municipalities of Virginia Beach and Chesapeake have planned corridors for data centers to take advantage of the trans-Atlantic cables that come ashore in Virginia Beach and their relative proximity to Ashburn both through their land-use policies and through investment, including by forming the Southside Network Authority to build a 120-mile, high capacity fiber ring throughout the region.

The bottom line is: Data centers make sense for local governments when they carefully plan the land use approvals to make them work. But careful consideration of comprehensive planning goals, particularly with regard to jobs generation and utility infrastructure (both water and electricity), are extremely important. --- Michael W.S. Lockaby