From the early days of the Internet economy, Northern Virginia has been the largest and most important data center markets. That dominance has grown over the years, to the point where business in Virginia can account for the majority of the annual leasing in the U.S.
That's why a recent report from Cushman & Wakefield got the industry's attention, declaring a tie for the top market between Northern Virginia and Portland, Oregon. It's a nod to the meteoric growth of the data center district in Hillsboro, a suburb of Portland that has been embraced by hyperscale operators as an ideal site for sustainable development.
It's clear that Cushman is seeking to stir the pot a bit in suggesting that Portland is "tied" with Northern Virginia. The report notes that Northern Virginia remains the largest market with more than 2.5 gigawatts of capacity and a vacancy rate around 1 percent, and most other firms that track data center real estate still place Northern Virginia firmly atop their lists.
But the Cushman & Wakefield report highlights the changing landscape of the hyperscale market, with new projects looking beyond traditional hubs to newer markets with abundant land and power.
“Portland’s rise is indicative of a number of smaller markets growing to be of key interest for the data center industry,” said Jacob Albers, Research Manager at Cushman & Wakefield. “Going forward, expect other secondary markets to see substantial jumps in rankings.”
That was true for Portland, which was in 10th place in last year's Cushman ranking before zooming to the top. The Cushman Global Data Center Market Comparison assesses 13 different categories, including fiber connectivity, market size, cloud availability, and more to determine the top overall markets.
A big factor is the emergence of power constraints in parts of "Data Center Alley" in Ashburn, the nexus of the Northern Virginia market. Hillsboro and other emerging markets have the advantage of being uncrowded, from a development perspective. But that is changing quickly in Hillsboro, where the amount of pre-leasing positions the region for long-term growth.
"There are more opportunities to buy bigger chunks of land and grow," said Steve Lim, the Senior VP of Marketing for NTT Global Data Centers, on the latest Data Center Frontier Show podcast. "We've been there for three years, and in that time we've seen three of our competitors acquire land and begin building directly across the street from us."
Why Hillsboro is Growing
At Data Center Frontier we've been tracking the Portland market for years, including a 2020 special report that identified the region as "as a future hot spot for hyperscale and enterprise facilities." That's certainly been realized as Hillsboro has emerged as one of the fastest-growing data center markets, reaping the benefits of a favorable cost environment (including a prominent enterprise zone and Oregon’s business-friendly tax policies) and a climate that’s ideal for keeping servers cool.
Hillsboro is a northern suburb of Portland that is home to a large Intel semiconductor fabrication facility. The adjacent Enterprise Zone offers tax benefits and abundant power, making the area a magnet for data center development. Tax breaks saved Hillsboro data center operators and customers $3.1 million in 2019 and $5.4 million in 2018, according to state records.
The Intel campus is surrounded by data center projects for the leading players in data center development, including Digital Realty, NTT Global Data Centers Americas, Stack Infrastructure, QTS Data Centers, EdgeConneX and Flexential, among others.
In recent months, those incumbents have been joined by three new entrants to the Hillsboro market:
- Aligned Data Centers is continuing its rapid expansion across the U.S. data center market, and in January it revealed plans to create a 27-acre, 108 MW data center campus.in Hillsboro. “The rapidly expanding Hillsboro data center market offers a host of advantages to hyperscale and large enterprise customers, especially as compared to other Western data center locations,” says Andrew Schaap, CEO of Aligned.
- A week after the Aligned announcement, Crane Data Centers and investor Principal Asset Management announced plans to build a 100-megawatt data center campus in Forest Grove, to the west of the primary Hillsboro cluster. The first phase will include a 300,000 square foot facility on a 35-acre site with an initial 50 MW of capacity.
- Meanwhile, Rowan Data Centers has announced plans for a campus in Forest Grove. Rowan is owned by Quinbrook Infrastructure Partners, which said in January that its relationship with Rowan had evolved from a joint venture to Rowan becoming a wholly-owned portfolio company of Quinbrook. Preliminary plans for the Project Meriwether development call for 150 MW of capacity.
Much of the optimism around the Hillsboro data center market stems from its emergence as a leading alternative to California, which boasts a large concentration of data centers. The California market has been roiled by the troubles of utility PG&E, which filed for bankruptcy protection in 2019 due to wildfire-related liabilities. The prospect of higher future utility bills, along with PG&E’s imposition of rolling service outages during periods of heightened wildfire risk, has customers looking beyond California’s borders for their West Coast data center workloads.
A key factor in the future of the Hillsboro cluster is how it fares in the fierce competition to woo data center users leaving California. Data center providers in Las Vegas and Phoenix compete aggressively for business from California-based customers, while the Pacific Northwest offers several other attractive options for large single-tenant requirements, including Quincy, Washington and Prineville, Oregon.
A meaningful differentiator is Hillsboro’s direct access to trans-Pacific subsea cables offering connectivity to fast-growing cities in the Asia-Pacific region, which are a key growth market for many customers.
Here’s a look at the major projects:
- QTS Data Centers is working with Facebook as the lead tenant on its 92-acre Hillsboro campus, which is set to support five data center buildings totaling 1.5 million square feet of space and 250 megawatts of power capacity.
- Flexential recently announced plans to add 54 megawatts of capacity in Hillsboro, which has become the company's largest campus. The company is partnering with T5 Data Centers on a phased deployment.
- NTT Global Data Centers Americas (formerly RagingWire) has opened a 47-acre campus that in Hillsboro that will house up to 144 MWs of critical IT load, and 1 million SF of data center space. The first of five buildings is scheduled to open in the summer of 2020.
- Digital Realty acquired its development site in Hillsboro as part of its purchase of DuPont Fabros in 2017, and has seen strong pre-leasing.
- Stack Infrastructure has bought additional land that boosts its capacity in the Portland suburb to 50 acres, which will allow STACK to expand its campus to 230 megawatts of critical power.
- Denver based EdgeConneX is also expanding in the Portland market. The company’s Hillsboro facility is located in a traditional office park, and EdgeConneX has acquired an adjacent building and will combine the two buildings through a shared electrical yard.