Key Takeaways From McGuireWoods’ 2020 Virginia Data Centers Event

March 5, 2020

McGuireWoods and McGuireWoods Consulting co-hosted a Jan. 29, 2020, seminar on the economic impact of data centers in Virginia. Held in McGuireWoods’ Richmond office, the event attracted about 60 attendees, including industry leaders and state and local officials. Richmond law firm partner Dale Mullen and McGuireWoods Consulting senior vice presidents Tracy Baynard of Tysons and Preston Bryant of Richmond led the event.

Here are some key takeaways from the discussion.

Virginia is the leading market for U.S. data centers: Northern Virginia is the largest hub of data centers activity in the United States, with tax benefits, incentives and proximity to Washington, D.C., making it a prime location for data centers. Seminar attendees received an exclusive briefing from Fletcher Mangum, Ph.D., CEO of Mangum Economic Consulting, who conducted research about data centers on behalf of the Northern Virginia Technology Council (NVTC). The mission of the NVTC’s Data Center and Cloud Committee is to promote the interests of the region’s growing data centers, cloud and critical infrastructure community to contribute to the long-term growth and prosperity of the industry. In 2018, Virginia’s data centers industry directly provided approximately $4.5 billion in economic output and employed more than 14,000 people, according to a 2019 study commissioned by the NVTC’s Data Center and Cloud Committee.

Tax incentives provide the foundation for continued data center strongholds across Virginia: According to the Mangum-NVTC study, to earn a tax exemption, a data center must invest at least $150 million in and add 50 new jobs to the local economy and pay 50 percent more than the average annual wage in the locality. In fiscal year 2018, eligible data centers in Virginia received $86 million in sales and use tax exemptions. Such tax incentives have kept major data centers players in Virginia, Mangum explained during the presentation. Once fiber cables are installed in concentrated areas, there is more incentive and capability to build additional data centers in close proximity.

Data centers are expanding statewide: Data centers that receive tax incentives can generate more tax revenue for the state of Virginia. As their growth continues, the reach of these data centers and developments will expand beyond Northern Virginia into regions in central and southern Virginia. State localities are becoming more aggressive in attracting this key industry. Data centers provide localities with a favorable benefit-to-cost ratio and help keep overall tax rates low.

Virginia is the gateway to the global data centers community: Virginia — in particular, Virginia Beach — will play a vital role in providing the digital port of data centers connectivity to the world. Virginia Beach is a critical landing spot for transoceanic cables that provide significant support and benefit to data centers connection points. These cables transfer news, music, videos, photos and critical information to people and companies around the globe faster than ever before.

McGuireWoods is at the nerve center of data exchange: From the commencement of electronic data collection, through storage and security, McGuireWoods counsels companies across industries on how to manage legal risks associated with data centers and collection. Data center investors, developers and operators turn to McGuireWoods for guidance on strategic transactions, disputes, legislative initiatives and regulatory matters.