Loudoun County, which includes the Northern Virginia data center sub-market of Ashburn, Virginia, reviewed its real property assessment update for 2022, which covers both residential and commercial real estate. Given that Loudoun County is home to Data Center Alley, important takeaways can be gleaned from the county’s summary of year-over-year changes in its property values – particularly for the data center segment of commercial real estate.

Loudoun County’s Data Centers – A Significant Piece of the Pie

As shown below, data centers represent 9.5% of total real property by value in Loudoun County, which includes both residential and commercial property types. However, within commercial real estate, data centers comprise nearly 50% of real property by value in Loudoun County. To this end, the value of Loudoun County’s data centers are nearly equal to all other commercial real estate use types combined, such as office and hotel.

Real Property Distribution by Value
Real Property Distribution by Value Loudoun County

Data Center Valuation Growth Eclipses Other Commercial Real Estate Sectors

For 2022, Loudoun County’s real property assessment valuation for all of its data centers reached $11.8bn, a 53.8% increase year-over-year. Members of Loudoun County’s Office of the Commissioner of the Revenue noted that this data center “valuation change is primarily from a new valuation methodology adopted for retail data centers, growth in the electrical capacity of existing retail data centers, and land acquired for data center construction”.

Countywide Taxable Commercial Real Property
Countywide Taxable Commercial Real Property Loudoun County

As a reference point, for 2021, Loudoun County’s real property assessment valuation for all of its data centers was $7.66bn, a 13.3% increase year-over-year.

Data Center Valuations Increase, Property Taxes Increase

Loudoun County’s data center market has grown considerably from 2018 to 2022 and currently stands at $11.8bn in taxable real property across 27.5 million sqft of data center space. Notably, these data center statistics includes completed / occupied properties, projects under construction, permitted but unbuilt projects, and vacant data center land.

Data Center Taxable Real Property
Data Center Taxable Real Property Loudoun County

As shown above, Loudoun County’s taxable data center valuations have grown at a compound annual growth rate (CAGR) of 41% from 2018 to 2022. Members of Loudoun County’s Office of the Commissioner of the Revenue noted that data center valuation growth year-over-year was primarily driven by increased power capacity, land acquisition for data center construction, and a new valuation approach for retail data centers.

Note: growth in valuations benefit from vacant land being developed into operational data center properties, amongst other factors noted above. Thus, historical growth rates should not be considered as being akin to like-for-like organic data center price appreciation.

Additionally, in terms of square feet, Loudoun County’s data centers have grown at a CAGR of 21% from 13 million sqft in 2018 to 27.5 million sqft in 2022.

Increased Taxation in 2022

Across all of Loudoun County’s commercial real estate property types, the total taxable real property value increased by 23.8% year-over-year, with outsized contributions to this growth coming from data centers, which recorded a 53.8% increase year-over-year. As such, Loudoun County commercial real estate and data center owners alike can expect to pay significantly higher real property taxes in 2022.

Examples of the data center operators impacted by these Loudoun County tax assessment increases include CyrusOne, Digital Realty, and Equinix. Indeed, each of these companies have property owning entities that form Loudoun County’s top 5 owners of real property, as shown below:

Top 5 Owners of Real Property in Loudoun County
Owner EntityData Center OperatorAssessed Value
CyrusOne LLCCyrusOne$1.21bn
Digital Loudoun 3, LLCDigital Realty$1.20bn
Equinix RP II LLCEquinix$468m
Digital Loudoun Parkway Center North, LLCDigital Realty$446m
Fox Properties LLCDigital Realty$355m
Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne (NASDAQ: CONE), and CoreSite Realty (NYSE: COR). Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing.

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