Sunday Summary: Sweet and Loudoun

It’s extremely possible that if Republicans fall in the Senate this week, the sleeper issue with voters will have been data centers.

Like anything in politics, defeat is rarely about a single issue. Open questions like Iran and tariffs and stubbornly high interest rates will all have their fingerprints on the electoral outcome. Still, the issue that wasn’t really on anybody’s political radar 12 months ago — but currently is underwater by 30 percent in recent polls — is data centers.

It’s also the real estate asset class that has been growing most wildly throughout the U.S.

Last year, an estimated $121.91 billion in credit was extended to data centers, according to S&P Global Ratings. From the first quarter of 2025 to the first quarter of 2026, 33 percent more data center inventory was added to the market (as per a report from CBRE earlier this year) but, at the same time, vacancy rates within operating centers have been at all-time lows.

The tightest market of all — coming in at 0.3 percent vacancy as of the beginning of the year — is Northern Virginia, which is the home of Loudoun County, which by itself hosts more data centers than anywhere else in the known universe.

There are some 253 data centers in Loudoun, spanning 49 million square feet and accounting for a quarter of all the data centers in the whole country. (The area’s nickname “Data Center Alley” sounds understatedly quaint.)

Moreover, wealth in data centers has accrued into actual wealth — Loudoun has a median household income of $170,000 a year, making it the richest county in America.

CO visited some of the county’s data centers, spoke to their opponents and advocates, identified some of the players in the space, traced the history of how Loudoun became Data Centerville U.S.A., and tried to figure out how this asset class became so unpopular.

“Some of [the popular distrust] is based on lies,” said Hossein Fateh of CloudHQ, who has been developing data centers since 2000, including in Loudoun, and was our Sit-Down. Critics “talk about water usage. Fifty percent of the data centers we built have zero consumption, because it’s a closed water loop. It’s like the radiator in your car. In Chicago, we have the biggest data center I built, going up with 240 megawatts of IT load. The water usage on the adiabatic system [which uses water evaporation to cool the center] is the same amount as one hole of a golf course per year.”

Of course, if data centers follow a similar trajectory as that of other technologies, they’ll eventually become smaller and more efficient, negating issues like water consumption altogether — and there are already people working on interesting proposals.

Jeff Thramann, for instance, is a neurosurgeon and inventor who started a data center firm called LT350, which intends to put smaller data centers on parking lot roofs!

Thramann looks “at our customers on a co-location model — think of the hyperscalars, the neo clouds, the frontier model labs — they’re all trying to get closer [to users], but their question is: Where can we put these things to be close?” he said. “And we think we have that solution.”

And, while so many data centers can currently be found in Loudoun, it isn’t like there aren’t alternative locations — including south of the border, where a number of hyperscalers are headed.

Querétaro, about a three-hour drive from Mexico City, is experiencing a sudden rush of data center development. (Within Mexico, Querétaro is even more dominant than Loudoun County is in America — about 72 percent of the country’s operational capacity can be found there.)

“There’s a number of large projects going up, but it’s quickly turning into a cloud region for Mexico,” said Cushman & Wakefield’s John McWilliams. Querétaro “has the opportunity to position itself not necessarily just as a major player in Mexico, but within the hemisphere.”

If the posture on data centers completely shifts after Tuesday, at least there’s somewhere for the data center developers to go.

Grades are in

While the politicians wait for their midterm grades, last week saw a flood of Q3 earnings — and the takeaway was mixed.

Vici Properties took a 55.1 percent hit to its funds from operations and $458 million in expected credit losses for the quarter. Most worrying for the REIT is the possible acquisition of Caesars (Vici’s biggest tenant) by Fertitta Entertainment, which could throw all sorts of uncertainty into the terms of Caesars’ leases. That being said, total revenue surpassed expectations.

Blackstone Mortgage Trust suffered a net loss of $327.6 million in income, which is more than four times its second-quarter losses.

“Looking ahead, while we are mindful of potential impacts from elevated rates, we believe we are well positioned,” said BXMT President Austin Peña. (Oh, yeah. Rates are staying where they are, and may go up.) “We have significantly repositioned our portfolio, and our investment channels are more diversified than ever.”

Alexandria Real Estate Equities reported a <a href="https://commercialobserver.com/2026/10/alexandria-q3-earnings-leasing-sales/" rel="nofollow noopener"

Source: commercialobserver.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.