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Policy Opportunity Brief  ·  Hampton Roads

MITHLOND

Downtown Data Centers — A New Tool for Economic Development
Draft — For Discussion

March 2025
Prepared for
Elected Officials
Hampton Roads
5,000
sq ft minimum viable
small colo facility
$0
new construction required
for existing office buildings
24/7
power demand — stable,
predictable city revenue
The Opportunity

Data Centers Are Smaller Than You Think

When elected officials hear "data center," they picture hyperscale campuses — hundreds of acres, massive cooling towers, years of construction. That image is correct for the giants of Northern Virginia. It is not the only model.

A small colocation facility — the kind that serves regional enterprises, hospitals, universities, and local governments — can operate in as little as 5,000 to 15,000 square feet. That is one floor of a typical downtown office building. It runs on power that cities already have relationships to negotiate over. And it needs exactly the kind of built-up, already-wired urban space that downtown Hampton Roads has in surplus.

The opportunity is straightforward: use the city's relationship with Dominion Energy as a negotiating instrument to attract a colocation operator into vacant downtown commercial space, on terms favorable to the city and property owners.

"The demand for compute infrastructure is moving southward from Northern Virginia. Hampton Roads can capture a share of that growth — in buildings that already exist."

Scale Reference

What Fits Where

~20,000 SQ FT
Typical Office Floor
Largely vacant in many downtown buildings
→
DATA CENTER AVAILABLE AVAILABLE AVAILABLE SAME FLOOR
Data Center Footprint
~5,000–10,000 sq ft (dark rectangle)

A small colocation facility occupies roughly one quarter to one half of a typical downtown office floor. The remainder stays available for other tenants, or phases into additional data capacity as the operator grows.

Regional Context — Hampton Roads
I-64 NORFOLK DOWNTOWN TARGET AREA VIRGINIA BEACH HAMPTON NEWPORT NEWS CHESAPEAKE PORTSMOUTH NOVA DATA CENTER CORRIDOR → ~200 MILES DOMINION ENERGY TERRITORY PORT OF VIRGINIA ~30 MILES Chesapeake Bay
Schematic map — not to survey scale. Norfolk downtown (★) is the primary target area for initial pilot exploration.
Why Here, Why Now

Northern Virginia holds the world's largest concentration of data center capacity. Power constraints there are now real — the interconnect queue at Dominion's northern facilities runs years deep.

Operators seeking mid-Atlantic presence, proximity to the federal government, and Atlantic cable landing points are actively looking southward. Hampton Roads offers:

  • Existing fiber infrastructure along the 64 corridor
  • Dominion grid access in the same utility territory as NOVA
  • Port of Virginia and transatlantic cable interest
  • Military / federal anchor tenants already here
  • Vacancy in built, wired buildings that need tenants

MITHLOND POLICY BRIEF — HAMPTON ROADS — DRAFT FOR DISCUSSION

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Mithlond Policy Brief — Page 2

THE MECHANISM

How city leverage creates private investment
Draft

Downtown Data Centers
Hampton Roads
The Deal Structure
1
City Acts

Municipality identifies vacant downtown properties and engages Dominion Energy as a facilitating party. City signals its interest in supporting reliable, large-scale power delivery to specific buildings.

2
Operator Recruited

City packages the offer to colocation operators: expedited permitting, property tax incentives, power certainty, and preferred lease terms negotiated with building owners — in exchange for locating downtown.

3
Lease Secured

Operator signs a long-term lease (typically 10–15 years) at a negotiated rate. The building owner gets a creditworthy anchor tenant. The city gets a stable commercial tax base in a previously vacant property.

4
Returns Flow

Data center operates 24/7. Property tax, business license revenue, and utility throughput all increase. Facility creates high-skill operations jobs and attracts downstream enterprise tenants.

City Leverage — The Power Variable

What Makes This Different From a Standard Incentive Package

Most economic development incentive packages rely on tax abatements alone. This model adds a distinct instrument: the city's relationship with Dominion Energy.

Data centers are, above everything else, power customers. A single small facility (500kW–2MW) represents the equivalent of 400–1,600 average homes in continuous, predictable load. That is a significant customer for a utility — and a utility relationship that a city, as a large municipal customer, can help broker, de-risk, or accelerate.

Specifically, cities can:

  • Help operators navigate Dominion's interconnection process and queue prioritization
  • Advocate for dedicated service classification (large commercial/industrial rate schedules)
  • Include power reliability commitments in the overall development agreement
  • Use economic development authority structures to package power + lease + permit into a single offer
⚑ Legal / Regulatory Note

The precise form of municipal involvement in utility rate negotiation is subject to Virginia law and SCC (State Corporation Commission) rules. The mechanism described here should be reviewed with the City Attorney and may require economic development authority structuring. This brief is a concept document, not legal advice. This step is known but workable.

City Benefits
🏢

Vacant Building Solved

Long-term creditworthy tenant for office buildings that have struggled since 2020.

💡

Stable Tax Revenue

Data centers don't move. Their equipment depreciates slowly. They pay reliably.

🔗

Tech Anchor Effect

Colocation draws the enterprise customers that rent racks — law firms, hospitals, government agencies.

Key Numbers
~$10M
Estimated annual revenue to a small (1MW) colocation facility. Most stays in operating costs and lease payments — directly into the local economy.
15–20
Direct jobs in a small facility. High-wage: network engineers, facilities technicians, security. Plus downstream jobs from enterprise tenants.
10–15 yr
Typical operator lease term. Provides building owners with long-term certainty in a challenging office market.
No. Virginia
World's #1 data center market. Power-constrained. Operators already expanding to secondary markets. Hampton Roads is the natural next node.
Virginia
Offers full sales tax exemption on data center equipment for qualifying facilities — one of the strongest state incentive packages in the U.S.

The Ask — Three Concrete Next Steps

01 —

Convene a working group with City Attorney, Economic Development Authority, and Dominion Energy representatives to assess the power-as-leverage mechanism and identify eligible downtown properties. Two or three buildings with high vacancy and existing electrical infrastructure are the starting inventory.

02 —

Commission a site-specific feasibility study on one target building: power capacity, structural load, fiber access, and permitting pathway. This study typically costs $25,000–$75,000 and is the basis for any operator conversation. Economic development funds or a VEDP grant may be applicable.

03 —

Engage two or three regional colocation operators informally to gauge interest and learn their site selection criteria. QTS, Flexential, and several smaller regional operators have expressed interest in secondary Virginia markets. A city-to-operator conversation does not commit anyone to anything — it defines what a deal would need to look like.

MITHLOND POLICY BRIEF — HAMPTON ROADS — DRAFT FOR DISCUSSION

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Mithlond Policy Brief — Page 3

CONTEXT & PRECEDENTS

This has been done. Here is the landscape.
Draft
Virginia's Data Center Landscape

The State Already Supports This

Virginia is one of the most data-center-friendly states in the country. The General Assembly has maintained a full sales and use tax exemption on computer equipment and enabling software purchased for data center use — saving operators 5.3% on capital expenditures that routinely run into the tens of millions.

The Virginia Economic Development Partnership (VEDP) actively recruits data center investment. Hampton Roads cities have existing relationships with VEDP that can be activated for this purpose. A city that approaches VEDP with a specific building and a specific operator conversation is in a very different position than one approaching cold.

The Virginia SCC (State Corporation Commission) regulates Dominion's rates but does not prohibit municipal economic development agreements that use utility access as a component of a broader package. The form matters; the concept is not novel.

Comparable Deployments

Downtown and urban colocation facilities are not hypothetical. Examples of data centers in repurposed office and commercial buildings include:

  • Flexential — Charlotte, NC: Colocation facility in an adapted mid-rise commercial building, serving financial services sector
  • Netrality Data Centers: Portfolio specifically built around repurposed downtown buildings in mid-size markets
  • DataBank: Has explicitly targeted "carrier hotels" and urban colo in non-hyperscale markets as a growth strategy
  • Richmond, VA: Has attracted edge and colo operators with packages similar to what is described here — offering Hampton Roads a proximate case study
⚑ Verification Note

Specific operator and deal details above should be confirmed before citing publicly. The general pattern — urban colo in repurposed commercial space — is well-documented and real. Individual case details may vary.

The Bigger Picture

What This Is Really About

The demand for compute infrastructure is a demand for physical space, power, and fiber — all of which cities already govern. The question is whether cities treat that governance as passive (permitting office) or active (economic development instrument).

Mithlond's argument is that cities have more leverage than they realize, and that leverage is most valuable before the market reaches them. Hampton Roads is in that window now.

The data center conversation also opens a longer conversation about who benefits from digital infrastructure. A city that helps recruit a colocation operator can also:

  • Negotiate community benefit provisions (local hiring, broadband access points, education partnerships)
  • Create a public record of what infrastructure is here and who operates it
  • Position the city as a stakeholder — not just a landlord — in the AI-era economy
Infrastructure Stack — Simplified
ENTERPRISE / GOVERNMENT TENANTS COLOCATION OPERATOR BUILDING OWNER (LEASE) CITY / UTILITY (POWER + PERMITS) CITY LEVERAGE ZONE Revenue and legitimacy flow upward. City leverage is foundational.
Known Unknowns — Before Any Formal Commitment

This brief establishes the concept. Before any formal city commitment, the following should be verified through a proper feasibility process:

Power capacity of candidate buildings — existing service amperage, transformer access, Dominion interconnect capacity for the specific address
Structural load — data centers are heavy (UPS batteries, dense servers). Some floors require reinforcement.
Virginia SCC rules on the specific mechanism of municipal involvement in utility rate or service classification
Existing permit pipeline — any data center applications already filed in Hampton Roads that would indicate demand or competition
Contact / Next Step

This brief was prepared to initiate a conversation, not close one. The next step is a working session with city staff, legal counsel, and Dominion to scope what's feasible in the near term.

Mithlond is available to facilitate that conversation and to connect city representatives with comparable municipalities and operators who have done this.

Mithlond — Hampton Roads Initiative

MITHLOND POLICY BRIEF — HAMPTON ROADS — DRAFT FOR DISCUSSION — All figures are estimates; verify before formal use

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