Why Amazon Is Investing $11B In A Small, Rural Virginia County

Amazon Web Services plans to spend billions developing data center megacampuses in a remote Virginia county, part of a rapid expansion of the tech giant’s footprint in the state that is pushing well beyond the data center industry’s traditional boundaries.

Last week, Amazon Web Services unveiled $11B in planned data center investment in Louisa County, Virginia, a sparsely populated and data center-less county located more than a two-hour drive south from the industry hub of Loudoun County. This massive investment in a relative data center hinterland is just the latest in a series of large-scale development efforts Amazon has launched across the commonwealth in the past year, often in areas that — like Louisa County — are rural and well south of existing data center hotbeds. 

Virginia, particularly Northern Virginia, continues to be the most important market for a data center sector experiencing unprecedented growth. But Amazon has been unique among its Big Tech peers in both its concentration of new data center development in Virginia, the scale of development, and the company’s willingness to extend its infrastructure footprint into more rural parts of the state.

“It’s part of a broader strategy: We’re moving out into more rural areas of the commonwealth,” Amazon Vice President Shannon Kellogg, who leads the company's public policy efforts in support of AWS, told Bisnow. “We knew, over time, that we would have to expand beyond the counties that we traditionally operated in like Loudoun and Prince William.”

In Louisa County, northwest of Richmond, AWS hopes to build a pair of data center campuses at a cost of $11B by 2040, located within an overlay district the county recently rezoned to allow such development. While Kellogg told Bisnow that the planned campuses will entail “a very substantial physical footprint” with “multiple large-scale buildings,” specific details as to the scope of the projects remain unknown.

Still, $11B represents a massive investment for a remote county whose largest town has fewer than 2,000 residents — the county's entire population is fewer  than 40,000 people — and where 90% of the land area is either undeveloped or used for crops or grazing. By comparison, the development Amazon announced in June near Columbus, Ohio, a major regional hub, totals less than $8B.

The campuses in Louisa County are part of Amazon’s planned $35B data center build-out across the commonwealth, which the company announced in January. Over the past year, Amazon has advanced major data center projects at a handful of sites across the state. Some of this build-out has been in Northern Virginia data center hubs like Loudoun, Fairfax and Prince William counties, but Amazon is also looking to build significantly farther afield, pushing south into rural counties like Louisa that at present have little in the way of data center development. 

In 2022, AWS announced plans for a $500M data center project on the site of a horse farm more than 60 miles south of Ashburn’s Data Center Alley in rural Culpeper County — an agricultural area with just four small data centers, all built more than a decade earlier.

Farther to the southwest, Amazon indicated in August it will be the end user of a planned 869-acre data center campus in King George County, a jurisdiction with fewer than 30,000 people and no other data centers.

South of King George County, Amazon filed plans in June for four data center campuses in remote Spotsylvania and Caroline counties, representing over 10M SF of data center development in an area that previously had none.

Amazon is also advancing development efforts in Fauquier County and has been reported as a potential end user for other campuses being developed by third-party operators in other rural locations throughout the state. 

The forces driving data center development beyond traditional hubs aren't unique to Amazon.

Dwindling availability of power and developable land in Northern Virginia, and in most large data center markets across the U.S., are increasingly forcing hyperscalers and third-party data center providers to look farther afield as they scramble to expand capacity to meet record demand for cloud services and AI applications. 

Within Virginia, Microsoft is expanding its existing data center campus in Mecklenburg County on the state’s southern border. Third-party providers are also developing campuses in places like Orange, Frederick, Tazewell and Stafford counties. 

Still, the scale of Amazon’s development across Virginia, and the company’s concentration of new facilities within the state, create a unique development geography compared to its hyperscale cloud competitors. Microsoft and Google, the second- and third-largest cloud providers behind AWS, respectively, have sought to build their eastern data center hubs even farther south in places like North Carolina and Tennessee.

“[AWS] is concentrating a lot in Virginia,” said James Grice, chair of the Data Centers & Digital Infrastructure Practice at law firm Akerman LLP.  “It really comes down to what applications are they running — you have to conclude that they perceive Virginia as the key intersection point for serving their customers.”

Grice said AWS’ comparatively concentrated build-out in Virginia is likely driven primarily by technological factors: the performance requirements of its cloud products and the geography and architecture of its existing infrastructure. 

AWS and other hyperscalers keep even the most mundane aspects of their development and site selection strategies close to the vest, but industry insiders point to the fact that the facilities supporting AWS’ current cloud offerings tend to be more densely clustered across fewer hubs, particularly Northern Virginia, than Google or Microsoft. 

Building new facilities in relatively close proximity to these existing data center clusters and key interconnection points is likely driven by the need to deliver fast computing speeds to customers, providing the shortest distance for data to travel between servers at the speed of light.

“They can probably address a similar marketplace from those fringe counties as they can from Loudoun County because there's just not that much difference in terms of latency,” Grice told Bisnow. “Going to Spotsylvania is not like going to Chicago.”

Amazon’s Kellogg acknowledges that latency is a primary consideration in the company’s Virginia development strategy. It’s a consideration that he says is amplified by the presence of some of AWS’ largest customers nearby. 

“We have to make sure that we have the latency experience that our customers are looking for, and Virginia is a big part of that,” Kellogg said. “Virginia has 70% of the world’s internet traffic and you have a massive presence by the federal government, and that’s a very significant and growing customer for AWS and has been for many years.”

Politics may also play a role in Amazon’s Virginia-focused data center build-out. At the state level, Virginia has proven to be friendly territory for the tech giant when it comes to development. Both AWS and state officials have touted their collaboration when it comes to siting data centers and other facilities in the commonwealth. 

In January, Amazon’s $35B development pledge was announced jointly with Gov. Glenn Youngkin, who simultaneously unveiled new legislation to expand tax exemptions and other incentives for data centers. Amazon’s investment hinges on passage of the Mega Data Center Incentive Program, which is still pending.

The proposed legislation has also played a significant role in driving data center development into new submarkets across the state. In addition to extending existing tax incentives, the bill would create grants for infrastructure improvements that tend to be necessary to build in rural areas. The explicit goal, experts say, is to remove a financial barrier to building in places like Louisa County. 

“It is really an important initiative for us and for others who want to expand into these more rural areas,” Kellogg said.