DATA CENTERS

COMMUNITY ACCEPTANCE/RESISTANCE

IMPACTS FOR RESIDENTIAL REAL ESTATE

What Every Landlord and Residential Investor Should Know

My intent is not to predict future events … but to interpret facts and trends

that may impact your and my life as residential rental landlords and investors.

With that in mind, in this issue I’ll tackle the topic of the mushrooming development of data centers and the potential impacts on how growth and local opposition or acceptance will shape residential real estate investments. My take is the influences will vary dramatically by market, power availability, and political response. 

That said, on balance I think data center development is likely to create more winners than losers among residential real estate investors over the next 5 -10 years. The key is distinguishing between areas that become data center networks and areas where projects are blocked or delayed. And then there is the wildcard of legislative actions.

Three Scenarios for Your Consideration … Ranked By Positive Impact for Investors

Scenario 1: Data centers are built with minimum delays.

Near-term (3 years) Residential Investors Benefits:

• Construction workers increasing demand for apartments and short-term rentals. 
• Engineers, electricians, and project managers relocating. 
• Suppliers and contractors leasing housing. 
• Increased municipal tax revenue that can improve schools and infrastructure. 

Note: Apartment occupancy frequently rises before permanent employment materializes.

Medium-term (3–10 years)

Residential investor benefits will be most robust when the data centers attract companies such as cloud providers, AI firms, cybersecurity companies, and networking firms to cluster nearby. Those businesses often generate higher-paying jobs than the data center itself with landlords enjoying:

• Increased home values 
• Accelerated rent growth 
• Lower vacancy 
• Growth in both local personal and commercial income 

Northern Virginia has realized decades of data center expansion and offers a useful model for Central Virginia. The greatest residential rental gains did not generally occur in communities adjacent to the centers. The “winning” communities are those that attracted the engineers, IT professionals, managers, contractors, and businesses supporting the broader technology economy.

If Central Virginia develops a comparable network combining reliable power, fiber connectivity, supportive local governments, and sufficient housing …it could mirror

the long-term appreciation pattern of Northern Virginia.

Scenario 2: Community resistance slows/halts projects

Virginia communities frequently object to data center developments. Typically, the key concerns relate to fears of high energy bills, increased water consumption, and persistent air and noise pollution. Protests and local regulatory opposition have also been fueled by developers that skirt public participation via non-disclosure agreements … leading to massive project cancellations.

From our (your and my) perspective as residential investors and landlords, there are some potential benefits in areas that strongly resist data center developments. Residents who do so also often oppose large-scale residential development as well. Supply constraints can strengthen landlord pricing power, given:

• Slower housing construction 
• Limited apartment supply 
• Higher rents when local employment is on the upswing

Scenario 3: Legislative Wildcard … States imposing data center bans.

As ever, political oversight and legislative intervention must always be anticipated …projecting net effects on data center development are at best elusive. Here’s what the most recent landscape looks like.

New York became the first U.S. state to suspend large-scale data center development. At least 15 other states are actively considering or have debated moratoriums, restrictive zoning, and utility rate hikes. Virginia has avoided mandating a total ban. So far, the Commonwealth has enacted a new energy consumption tax of $0.011 per kWh on data centers and ended previous exemptions to control grid strain.

Click here for more details.

Central Virginia … Data Center Attraction Criteria

Markets most likely to support strong residential investment opportunities will be those that demonstrate:

• Reliable electric power 
• Expandable transmission infrastructure 
• Pro-development local governments 
• Available industrial land 
• High-quality fiber connectivity 
• Reasonably constrained housing supply 

The Power Constraint is the biggest issue. Regions that expand

grid capacity first may attract a disproportionate share of new projects.

Counties that proactively balance growth with predictable permitting and infrastructure expansion are likely to capture more investment. Additionally, the best opportunities for residential investors are communities that attract the engineers, contractors, and professional services supporting the data centers while remaining desirable places to live.

In Central Virginia, that points particularly toward the western and northwestern Richmond suburbs and selected nearby counties positioned to absorb long-term population growth. Given the above success criteria, here’s my ranking of the most desirable counties for Central Virginia residential investors over the upcoming decade.

Whether you’re managing one property or a growing portfolio, staying ahead of developing trends is critical. We’re here to help you evaluate your property performance, manage expenses, optimize returns … plus deliver proven successful property management.

Give us a call or drop an email. We’ll respond promptly

to help you make informed, confident decisions … 

plus maximize your rental property return on investment.