Blackstone’s QTS Abandons Massive Data Center in Virginia

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(Bloomberg) — Blackstone Inc.’s QTS is walking away from plans to build its portion of a 2,100-acre data center campus in Virginia, handing a win to residents who fought for years to topple the project.

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The data center developer had planned to transform more than 800 acres in Northern Virginia’s Prince William County into a centerpiece of one of the world’s largest technology corridors. Located on the edge of an historic Civil War battlefield and on what used to be land protected from development, the project ignited strong pushback from homeowners and has been stalled by lawsuits.

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In recent days, QTS executives decided that it isn’t worth pressing forward in court, according to people familiar with the matter. The firm’s attorneys plan to inform the court of their decision as soon as this week, the people said, asking not to be named discussing non-public information.

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A spokesperson for Blackstone declined to comment, while a representative for QTS did not immediately respond to requests for comment.

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QTS’s rapid growth has made it a poster child of how private equity has fueled the data center industry’s breakneck expansion. Those ambitions are colliding with public anxiety over strains to electricity grids and home prices from AI data centers.

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The retreat is the latest blow to Virginia’s “Digital Gateway” project, a mega site roughly twice the size of New York’s Central Park with city-sized power needs. The initiative was supposed to bring in some $100 billion in spending and create one of the world’s largest technology corridors. 

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The project had sparked contentious, drawn-out public hearings. A clerical blunder related to a key zoning meeting created setbacks for developers. Already, Brookfield-backed Compass Datacenters, which was supposed to build on more than 800 acres at the site, had pulled out in May. 

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The U-turns by both firms amount to one of the most dramatic retreats by developers from a data center project.   

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It’s a reminder of how tech firms’ race for the computing infrastructure to support AI advances is increasingly facing bottlenecks, from power shortages to supply crunches. Organized opposition is mounting, forcing firms and developers to be more deliberate about where they choose to build.

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To account for the costs of such build outs, Virginia recently passed a budget with an energy consumption tax on data centers, and more states are threatening moratoriums on new development. Data centers – and how their costs and benefits are shared – are now emerging a major swing issue in the lead up to the US midterm elections. These hurdles raise questions for investors over whether the AI build out can keep going at this pace. 

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27-Hour Public Hearing 

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For community organizers and residents that spent the last five years opposing the Digital Gateway, QTS’s pullout will now validate a playbook that involved pressure campaigns on local politicians and legal attacks.