Strong Leasing for Digital Realty in Santa Clara

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Santa Clara, Calif. continues to be one of the hottest data center markets, as end users are leasing entire buildings almost as soon as they are available. Digital Realty Trust said this week that it has already signed leases for more than 65,000 square feet of data center in two Santa Clara properties it acquired in May.

Digital Realty said Friday that it has leased all of a 40,000 square foot building at 1725 Comstock in Santa Clara to a new customer it identified only as an “Internet enterprise customer.” The data center REIT acquired the building in May for $14.1 million.

Digital Realty also said that it has leased an additional 25,000 square feet of space at 3105 & 3115 Alfred Street in Santa Clara, describing the tenant as an “IT services provider who is an existing customer in other markets.”  The property consists of two shell buildings totaling approximately 82,000 square feet, the remainder of which is being redeveloped as Turn-Key Datacenter space. The purchase price for the Alfred Street properties was $10 million.

The new leases were disclosed as part of Digital Realty’s second quarter earnings release. Some other new nuggets from the release and conference call:

  • Digital Realty said it closed the acquisition of the Rockwood Capital/365 Main portfolio on July 13. “Integration if the portfolio is going extremely well,” said Digital Realty CEO Mike Foust, who said the company is already marketing development space in Chandler, Ariz. and Chantilly, Va. from the former 365 Main holdings.
  • Foust said Digital was seeing an “elongating sales cycle” with enterprise customers, who were taking nine to 12 months to make complete leasing decisions, while managed hosting and colo players were moving more quickly to take down space.
  • Digital Realty said commencements on some signed leases are extending into 2011. That will move some revenue from 2010 into 2011.
  • The company leased more than 145,000 square feet of Powered Base Building space, a larger volume than in recent quarters, when Digital’s leasing has been dominated by finished Turn-Key Datacenter space. Foust said this was an anomaly rather than a trend. “The turnkey space will still be the majority of revenues,” he said.
  • Digital Realty said it continues to look for potential acquisitions: “We’re looking at relatively large opportunities, but not of that (365 Main) size,” said Foust. The Rockwood Portfolio traded at about $725 million.

About the Author

Rich Miller is the founder and editor-in-chief of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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