t’s a 17-year timeline, but Amazon Web Services’ choice to bet $35 billion on data center campus development at multiple locations in Virginia counts all the same. Do a little math and the company’s data center investment in Virginia will come to $70 billion over 34 years.
The news was announced in late January by Virginia Governor Glenn Youngkin. A release from his office said, “Numerous localities in the Commonwealth are under consideration and will be decided at a later date.”
“Since 2006, AWS has invested more than $35 billion in Virginia, boosting the Commonwealth’s total Gross Domestic Product by nearly $7 billion and supporting thousands of jobs annually,” said AWS Director of Economic Development Roger Wehner. “Virginia is a world leader in innovation and cloud computing, thanks to its investment in a robust, highly skilled workforce and emphasis on long-term public and private partnerships.”
Incentives Pass in Legislature
The Virginia Economic Development Partnership worked with the Virginia General Assembly’s Major Employment and Investment (MEI) Project Approval Commission to secure the project. Pending approval by the General Assembly, the Commonwealth is developing a new Mega Data Center Incentive Program, which the company will be eligible to receive. The new program would include up to a 15-year extension of data center sales and use tax exemptions on qualifying equipment and enabling software.
HB 2479, creating the Cloud Computing Cluster Infrastructure Grant Fund, passed the Virginia House in early February and the Senate on February 15. It “extends the data center sales and use tax exemption to 2040 for a data center operator that (i) makes a capital investment of at least $35 billion in data centers in the Commonwealth and (ii) creates at least 1,000 direct new jobs with an average wage of at least one and a half times the prevailing wage of the locality where the job is located.” The operator is eligible for extension to 2050 if the operator makes a total capital investment of at least $100 billion, inclusive of the initial $35 billion investment, and creates a total of at least 2,500 direct new jobs at that same wage multiple.
“There are several industries for which projects have a long investment schedule, even going out decades,” says Tracey Hyatt Bosman, managing director of location and incentives advisory firm Biggins Lacy Shapiro & Co. “There are some incentive programs with compliance requirements that go out longer than 17 years. Longer incentive periods seem to be becoming more common for these more capital-intensive projects.”
Nearly 30 states offer some degree of incentives for data center investment. But the new measure comes after a number of Virginia regions have moved to limit the runaway-train momentum of the sector. Loudoun County in October 2022 passed measures agreed to by the industry to more closely manage the areas where data centers can be located in a county saturated with some 200 data centers. New bills introduced in January sought to tighten regulations in areas adjacent to national parks or Civil War battlefield sites, partly in response to a plan called the Prince William Digital Gateway that calls for massive data center developed in Prince William County.
A Virginia Senate joint resolution that would direct the state’s department of energy to study the impacts of data center development was tabled by a subcommittee in mid-February. Among its “whereas” claims: “Virginia’s data center sales and use tax exemption is by far the Commonwealth’s largest economic development incentive, costing Virginia $138 million in 2020 and with a cumulative total estimated at over $830 million from 2010 to 2020.” The bill text also noted that “a 2019 report of the Joint Legislative Audit and Review Commission found that Virginia received back only 72 cents for every dollar of tax incentive.”
The AWS investment is projected to create around 1,000 jobs, which averages out to just under 59 jobs a year until 2040.
An AWS spokesperson speaking on background noted that the company’s ongoing investment “includes imports of highly specialized and proprietary equipment, and local spending on construction labor and materials, utilities, security, our data center employees and many other services needed to build and operate data centers. In 2020 alone, for instance, AWS investment in the construction and operation of data centers contributed $1.3 billion in GDP and supported over 13,500 jobs in Virginia. AWS is among the largest private-sector employers in the state, with over 8,800 full-time, well-paying jobs in corporate offices and data centers across Virginia.”
“Since 2006, AWS has invested more than $35 billion in Virginia.”
— AWS Director of Economic Development Roger Wehner
The company’s 2022 Community Impact Report about the Capital Region also notes the parent company’s creation of the $2 billion Amazon Housing Equity Fund to support “innovative projects that create and preserve affordable housing in the communities we call home.”
Move Over, NoVa?
Northern Virginia and its 2.5 gigawatts of capacity still reigns supreme, says the Cushman & Wakefield 2023 Global Data Center Market Comparison study, released in January and covering 63 global markets, including more than 1,600 data centers. The firm examined 13 different categories, including fiber connectivity, market size, and cloud availability. According to the firm’s research, the top 10 data center markets are:
1. Northern Virginia (tie)
1. Portland (tie)
4. Hong Kong
5. Atlanta (tie)
5. Chicago (tie)
5. Silicon Valley (tie)
Portland rose from No. 10 last year “due to the rapid expansion of hyperscale activity in the Hillsboro submarket, as well as relatively favorable pricing, sustainability options, low environmental risk and more available land,” the report said.
Among other findings, “Power availability became increasingly constrained, particularly in top markets. Power costs rose, with utility costs in our set of markets rising by a median of 16%.” Also, “Despite headwinds in the form of high competition for land and lack of available power, larger markets continued to grow and perform.”
To which Virginia and its $35 billion in new AWS investment can say, “You got that right.”