QTS Realty Trust has announced it has commenced development of a mega data center campus in Ashburn, VA. Since the end of the second quarter of 2017, the company has agreed to acquire a total of 52 acres of land in Ashburn in two parcels for a total purchase price of $53 million.
The first parcel, representing 24 acres and a $17 million purchase price, closed during the third quarter of 2017. The second parcel, representing 28 acres and a $36 million purchase price, closed subsequent to the end of the third quarter of 2017.
The combined site is located adjacent to QTS’ existing Vault campus in Dulles, Virginia, and provides significant capacity to support the company’s ongoing growth in the nation’s largest Tier 1 data center market. In addition, the combined land parcels enhance the company’s strategic options in the Northern Virginia market where available land for development has become increasingly scarce. QTS believes the new combined site can ultimately support a total of more than 700,000 sq ft of raised floor capacity and 140 megawatts of gross power.
QTS has commenced construction on the first 24-acre parcel of land in Ashburn and currently expects to deliver Phase 1 of its multi-tenant development, representing approximately 4 MW of critical sellable capacity, by mid-2018. To date, QTS has pre-leased 2.2 MW, representing over 50% of Phase 1 development capacity, to a global health insurance provider, reflecting typical enterprise wholesale pricing.
QTS remains in active dialogue with a number of potential customers and currently expects to sign additional pre-lease commitments prior to the completion of Phase 1 development. Ultimately, the pace of future development at the Northern Virginia site will be dictated by market demand and ongoing discussions with existing and potential customers.
Through the first half of 2017, the Northern Virginia data center market has accounted for approximately 25% of total wholesale capacity absorption among the top 10 data center markets in the U.S., largely driven by strong demand from hyperscale companies, according to JLL.
QTS’ mega scale data center development in Ashburn supports the next phase of the company’s growth strategy. This approach includes an intentional focus on satisfying large, multi-megawatt requirements, engineered to meet the need for speed, flexibility, infrastructure visibility, economics and operator excellence. Together, with its recently introduced QTS HyperBlock solution, which delivers multiple smaller block deployments over time, QTS is able to deliver a broad set of solutions designed for hyperscale customers.
“We are excited to have additional sellable capacity in a strategic QTS market to expand our ecosystem of more than 130 customers currently supported within our Northern Virginia footprint,” said Chad Williams, chairman and CEO, QTS. “Our fully-integrated 3C platform, combined with mega data center scale, position QTS to take advantage of increasing hybrid IT requirements, particularly from hyperscale companies.”
Additional land acquisitions
Since the end of the second quarter of 2017, QTS also purchased land for future development in two additional strategic markets. During the third quarter of 2017, QTS acquired 84 acres of land in Phoenix for a purchase price of $25 million. The land parcel is located approximately four miles from QTS’ existing data center in Phoenix, and provides the opportunity for significant future potential expansion. Phoenix remains a high demand data center market due to an abundance of cost-effective power, fiber-rich connectivity, and low natural disaster risk.
Subsequent to the end of the third quarter of 2017, QTS acquired 92 acres of land in Hillsboro, Oregon for a purchase price of $26 million. Hillsboro, Oregon is attracting technology companies and rapidly becoming one of the largest hyperscale data center markets on the west coast due to multiple key factors, including affordable power, robust connectivity, and local and state tax incentives.
QTS plans to complete pre-construction work over the coming months to position both the Phoenix and Hillsboro locations for future development. Ultimately, development of either site into sellable data center capacity will be subject to market demand and ongoing interest from existing and potential new customers.
“Our announced development in Ashburn combined with new strategic optionality in Phoenix and Hillsboro, enhance QTS’ ability to deliver scalable capacity solutions in the top U.S. hyperscale data center markets,” said Jeff Berson, chief financial officer, QTS. “The ability to extend our hyperscale growth strategy with a de-risked development plan is consistent with QTS’ overall balanced approach to capital allocation.”