Updated Jan 13. to note COPT's 19 data centers were valued, in total, at more than $1 billion when their sales were announced.

Blackstone Group has created two new joint ventures with Corporate Office Properties Trust to acquire five single-tenant data center shell properties in Northern Virginia, expanding the New York private equity giant’s already sizable investment in the nation's largest data center market.

The data centers total about 1.1 million square feet and are valued at $278 million, according to a statement Wednesday from COPT, a real estate investment trust based in Columbia, Maryland.

The transactions occurred in mid-December and January. COPT received roughly $250 million in proceeds, which it will use to fund equity for its development pipeline, per the statement. With these deals, the company does not anticipate needing to raise any additional capital in 2023.

The venture is the latest between Blackstone and COPT to acquire data centers in the Northern Virginia market, and it adds to Blackstone’s rapidly growing stake in the industry. Starting in 2019, COPT has formed three data center joint ventures with funds affiliated with Blackstone Real Estate, including one joint venture with Blackstone Real Estate Income Trust, according to COPT filings with the Securities and Exchange Commission. Funds affiliated with Blackstone Real Estate own 90% of the joint ventures, and COPT the other 10%. In its statement, COPT did not identify the Blackstone affiliate involved in the joint venture.

Blackstone secured a $268 million loan on Dec. 1 for five data center properties, public records show. The facilities include two data centers in Prince William County, 15395 John Marshall Highway and 7060-7080 Wellington Road, which were worth $28.5 million and $46 million of the loan, respectively. The other three were in Loudoun County: 21263-21271 Smith Switch Road, worth $60.8 million; 20935 Loudoun County Parkway, worth $59.6 million; and 45761-45771 Maries Road, worth $73.6 million. Blackstone declined to provide comment on the transaction to CoStar News.

All the properties listed in the loan have been owned by COPT since the mid-2010s, according to CoStar data. In 2016, COPT sold half its stake in three of the data centers, those on John Marshall Highway, Wellington Road and Smith Switch Road, to GI Partners. At that time, the sole tenant at those three facilities was VAdata, a subsidiary of Amazon Web Services, according to a press release from that sale.

COPT owns 5 million square feet across 27 data centers, 19 of which are owned by joint venture partnerships with Blackstone, according to a COPT third-quarter earnings report. The 19 data centers were valued, in total, at more $1 billion when their sales were announced.

The Northern Virginia region boasts the largest data center market in the country, with 26 million square feet of facilities in Loudoun County alone. The neighboring Prince William County this fall opened up more than 2,000 acres to future data center development, portending exponential growth in an already hot market.

Data centers are among the industrial properties Blackstone identified as showing promise in 2023.

Blackstone REIT already holds more than $3 billion in data center investments, according to its third-quarter earnings report filing with the SEC. It grew its holdings by about $1.3 billion since the third quarter of 2021.

In 2021, Blackstone acquired Quality Technology Services Realty, a company valued at $10 billion with almost 30 data centers in the U.S., including six in Virginia. It has an additional 19 data center development sites.

Demand for data centers, which store computer systems and data, has largely grown during the pandemic, but some investors say the growth won’t last. Jim Chanos, president and founder of New York investment adviser Kynikos Associates, has taken a bearish attitude toward the industry, arguing that as large data users such as Amazon and Microsoft build out their infrastructure, they’ll take away business from third-party operators.

While data center investment remained robust in the first half of 2022, investment started falling off in the second half of the year, according to CBRE research in October. Global market volatility and price discovery amid rising interest rates delayed transactions.

Recessionary concerns and higher interest rates notwithstanding, investor interest in data centers is expected to remain strong given the underlying fundamentals, CBRE reported. Compared to other asset types, data centers benefit from increased allocations from new and existing investors, providing ample liquidity deals.