Leesburg and Beyond: TA Realty Sees Long-Term Growth in Data Centers

TA Realty recently unveiled plans for a 1.5 million square foot data center campus near Leesburg, which is emerging as a new data center hub in the Northern Virginia data center market.

The project is the first step in a larger push into the digital infrastructure market by TA Realty, a private equity investor with lengthy experience in commercial real estate.

“We expect data centers to be a major asset class for us,” said Alison O’Rourke, the Vice President of TA Realty. “We’d like to be in this sector for the long run. We took our time with making this first investment. We think that this is an amazing place to be.”

TA Realty joins a growing group of new investors targeting the data center sector, seeking a stake in the rise of a global economy powered by digital infrastructure. Like many of these new players, Boston-based TA Realty has the resources to compete at scale. The company manages more than $30 billion of real estate assets, and is owned by the Rockefeller Group, which is part of Japan’s Mitsubishi Estate real estate group.

“This is a sector that our firm has been watching for quite some time,” said O’Rourke. “We like the space for a number of reasons. The most obvious is that collecting and processing data is really the future of our entire economy, and that’s driving data center growth. I think we’re only scratching the surface of where that goes.”

Building Big in Leesburg Cloud Cluster

That optimism about the sector is reflected in TA Realty’s plans for the campus in Leesburg, where it plans to invest $1.8 billion to create a 300-megawatt campus featuring up to seven data center buildings with an on-site power substation. The site will be developed in phases, with the first phase expected to include two 260,000-square -foot buildings with up to 35 megawatts (MWs) of power. Capacity will be available in early 2023.

“Right now we are going through the fast-track process with Loudoun County,” said O’Rourke. “Leesburg is west of (Ashburn), but we are still in the sweet spot for fiber and utilities. This was probably the last remaining large parcel where you can build a campus.”

The TA Realty project is situated between a Google data center and the future site of a Microsoft cloud campus near the Leesburg Executive Airport. To the south is a new campus for Compass Datacenters, a wholesale data center provider who often works with hyperscale players.

The growing Leesburg cluster is part of the fast-growing data center market in Northern Virginia, which is the center of cloud computing infrastructure. The largest cloud cluster is in Ashburn’s “Data Center Alley,” a key connectivity hub that has been the focus of frenzied data center development. With a shrinking supply of properties  in Ashburn, developers have shifted their focus to nearby towns that can offer land and power capacity.

O’Rourke said TA Realty is using a flexible design that can support either hyperscale or enterprise tenants, and is mindful of the growing focus on sustainability.

“The buildings are designed to be LEED Gold,” said O’Rourke. “We are mindful of demand for renewables and want to offer as much flexibility as we can to our tenants to get the kind of power that they want.”

She also noted that the site is adjacent to the Panda Stonewall Power Project, a large natural gas-powered generating station, which could provide a fuel source for alternative approaches to on-site power.

Similar Footprint for Data, Logistics

O’Rourke says TA Realty expects to expand its data center operation. “We are actively looking in multiple markets,” she said. “We are looking at opportunities for development as well as already stabilized or partially stabilized assets. I think you’ll also see us go global, and that has been part of our thesis from the beginning.

“The data center sector is unique in that the bulk of your tenants are global companies, so you can’t play this as just a regional game,” said O’Rourke. “One of the things that’s unique about TA is that our parent company is 70% owned by Mitsubishi, which gives us (potential) footprints around the globe.”

TA Realty has historically been an active investor in offices, multi-family housing and industrial properties, which are now about 50% of the firm’s portfolio. TA Realty manages institutional money, working with pension funds for governments and corporations.

“(Data centers are) a high growth sector and will continue that way, and we have institutional investors that want to be able to invest,” said O’Rourke. “Institutional investors really haven’t had the opportunity to access this market very well.”

O’Rourke said that TA Realty brings some useful experience in logistics real estate.

“There’s a lot of similarities between data and logistics,” she said. “You’re either moving goods or your data, and they really look a lot alike.”