Blackstone-owned QTS Realty Trust formally withdrew its application for a 2.1 million square foot data center campus in Prince William County, Virginia, on July 2, 2026. The abrupt cancellation deals a significant blow to the county's planned 'Digital Gateway' corridor, a multi-billion dollar initiative intended to transform the area into a premier data hub. The decision follows mounting regulatory scrutiny and community opposition to large-scale data center development in the region.
Context — why this matters now
Data center development faces increasing headwinds from local opposition and power grid constraints, particularly in key northern Virginia markets that handle over 50% of global internet traffic. The Loudoun County data center cluster, known as Data Center Alley, has seen development costs surge amid rising energy demands and environmental reviews. Prince William County emerged as a primary expansion target for hyperscalers seeking proximity to Ashburn's fiber networks without the same saturation.
The 'Digital Gateway' proposal aimed to rezone over 2,000 acres of agricultural land for data center use, representing one of the largest potential expansions of digital infrastructure on the East Coast. QTS submitted its application in late 2025 as anchor tenant prospects including Amazon Web Services and Microsoft advanced negotiations for capacity. Regulatory pushback intensified in early 2026 as county supervisors questioned water usage and power transmission requirements for the massive campus.
Data — what the numbers show
The abandoned QTS project represented approximately 157 megawatts of potential computing capacity, equivalent to powering 118,000 homes. Northern Virginia currently hosts 125 data centers totaling 2.5 gigawatts of capacity, with another 1.8 gigawatts under development across 50 additional facilities. Power consumption by data centers in Virginia has increased 60% since 2022, reaching 2.7 gigawatts according to PJM Interconnection reports.
Prince William County's proposed Digital Gateway corridor could have added up to 10 million square feet of data center space across multiple developments. Land values in the proposed corridor surged from $15,000 per acre to over $300,000 per acre since the initiative was announced in 2023. The QTS withdrawal follows Compass Datacenters' cancellation of a 1.2 million square foot project in nearby Loudoun County in March 2026 due to transformer shortages.
Data center vacancy rates in northern Virginia remain at record lows of 1.2% despite construction activity, with average lease rates reaching $150 per kW/month for premium space. The region has absorbed over 500 megawatts of new capacity annually since 2024, driving power infrastructure investments exceeding $5 billion from Dominion Energy. Prince William County currently hosts 12 operational data centers totaling 350 megawatts of capacity.
Analysis — what it means for markets / sectors / tickers
The QTS retreat signals potential valuation headwinds for data center REITs including EQIX, DLR, and CONE that have relied on northern Virginia expansion for growth. Landowners in Prince William County face immediate pressure, with parcel values likely declining 20-30% following the project cancellation. Electrical equipment suppliers including ABB and Eaton may see reduced orders for transformers and switchgear as development timelines extend.
Counterintuitively, established data center operators in occupied markets may benefit from constrained supply supporting higher lease rates. Equinix's Ashburn facilities command premium pricing power as available capacity diminishes, potentially adding $200 million annually to revenue based on current absorption rates. Cloud hyperscalers including Amazon, Microsoft, and Google face increased capital expenditure requirements as development delays push them toward more expensive colocation alternatives.
The withdrawal reflects growing environmental, social, and governance pressures on infrastructure development, particularly regarding water consumption and carbon emissions. Data centers consume approximately 3-5 million gallons of water daily per campus for cooling systems, creating regulatory risk in drought-prone regions. Dominion Energy's grid upgrade timeline has extended to 2028 for some transmission projects, creating a fundamental constraint on new capacity coming online.
Outlook — what to watch next
Prince William County supervisors will vote on the comprehensive plan amendment for the Digital Gateway on August 6, 2026, with the QTS withdrawal significantly reducing likely approval odds. Dominion Energy's Q2 earnings call on July 25 will provide updated guidance on grid investment requirements and capacity allocation timelines for data center developments. The Virginia Corporation Commission will rule on proposed rate increases for industrial power users in September 2026, potentially adding 15-20% to data center operating costs.
Market participants should monitor power availability maps from PJM Interconnection showing projected capacity constraints through 2027. Land transaction volumes in alternative data center markets including Columbus, Ohio, and Atlanta, Georgia, have increased 40% year-over-year as developers seek regions with fewer regulatory hurdles. Microsoft's planned $1.2 billion data center campus in Mount Pleasant, Wisconsin, represents a test case for development in non-traditional markets with different regulatory frameworks.
Frequently Asked Questions
What does the QTS cancellation mean for other Digital Gateway projects?
The withdrawal creates substantial uncertainty for the entire Digital Gateway initiative, as QTS served as anchor tenant for approximately 30% of the proposed capacity. Other developers including Compass Datacenters and CloudHQ now face increased regulatory scrutiny and potentially higher infrastructure requirements. County supervisors may reconsider the scale of rezoning approvals following the abandonment of what was considered a flagship project for the corridor.
How will this affect Blackstone's data center strategy?
Blackstone acquired QTS for $10 billion in 2021 as cornerstone of its digital infrastructure strategy, with the Virginia campus representing key expansion plans. The REIT will likely redirect capital to development markets with fewer regulatory hurdles, including Phoenix, Arizona, and Salt Lake City, Utah. Blackstone's infrastructure fund remains committed to data centers but may prioritize acquisition of existing facilities over greenfield development given permitting challenges.
What are the implications for electricity demand forecasts?
PJM Interconnection may revise its load growth projections downward for northern Virginia, currently forecasting 7% annual growth through 2030. Dominion Energy's $9 billion grid transformation plan assumed 1.2 gigawatts of new data center demand by 2028, which now faces potential delays. Lower-than-expected demand could reduce rate pressure on residential consumers but might delay grid modernization investments necessary for reliability.
Bottom Line
QTS's retreat signals fundamental constraints on data center expansion are now impacting project viability.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
