Wholesale real estate provider Digital Realty Trust (DLR) says it leased a record 1.2 million square feet of space in 2010, exceeding the levels seen prior to the financial crisis in the fall of 2008. That performance marks a 160 percent improvement on its 2009 total of 472,000 square feet, and also tops the company’s previous best single-year leasing of 1.1 million square feet in 2008.
“We saw momentum in our sales activity continue to increase over the course of 2010, resulting in our strongest annual leasing performance to date in terms of square footage and total contract value of $1.2 billion,” said Michael Foust, CEO of Digital Realty (DLR), a real estate investment trust specializing in data center properties. “Enterprise demand is driven by the consistent growth of applications in corporate IT departments as well as growth in providers of colocation and managed services.”
Jump in Powered Shell Leasing
The company also reported a surge in leasing of its Powered Base Building product in the fourth quarter of 2010, a sign that some large customers are opting to invest in building out their own data center space rather than leasing fully-built wholesale space.
In the quarter that ended Dec. 31, Digital Realty leased 478,000 square feet of space, including 89,000 square feet of Turn-Key Datacenter space leased at an average annual GAAP rental rate of $184.00 per square foot, approximately 234,000 square feet of Powered Base Building space leased at $39.00 per square foot, and 155,000 square feet of non-technical space leased at $20 per square foot.
The Turn-key Datacenter program offers customers finished ”plug and play” raised-floor data center space, which shifts the data center development costs from the tenant to the landlord, and allows for much quicker deployment than if the customer built a new facility on its own. Powered Base Building (PBB) is undeveloped space with the power and fiber connectivity already in place, allowing for easy expansion.
The fourth-quarter total of 234,000 square feet of PBB was more than the company leased and commenced in all of 2009. While the company sees variation in its leasing mix from quarter-to-quarter, the jump in powered base appears to reflect increased activity by large players who have the capital to invest in fitting out their own data center space. Digital Realty didn’t identify any of the new PBB tenants, but companies leasing “powered shell” space to install custom infrastructure could include financial services customers or cloud builders like Amazon.com.
Strong Demand Across Multiple Industries
“Our fourth quarter lease signings reflect strong demand for both our Turn-Key Datacenter and Powered Base Building products across multiple industry verticals in the U.S. as well as Europe,” said Michael F. Foust, Chief Executive Officer of Digital Realty Trust. “Rental rates, particularly for our Turn-Key Datacenter space, vary from market to market, impacting quarterly results. Markets where we saw the strongest pricing for Turn-Key Datacenter space during the year were Santa Clara and New York Metro, which is reflected in our second and third quarter 2010 lease signings.”
In addition to lease signings, Digital Realty reported data on lease commencements. A lease commences when the tenant occupies the facility, which often lags the lease signing by a few months. Here’s a look at the lease commencement figures for the full-year 2010:
- In addition to the lease signing data, Digital Realty reported that it commenced leases totaling over 652,000 square feet of space. The 2010 lease commencements included 420,000 square feet of Turn-Key Datacenter space leased at $159.00 per square foot, 91,000 square feet of Powered Base Building space leased at $32.00 per square foot, and approximately 141,000 square feet of non-technical space leased at an average of $20.00 per square foot.
Here’s a look at the lease commencement data for the fourth quarter, ending Dec. 31, 2009:
- For the quarter ended Dec. 31, Digital Realty commenced leases totaling approximately 143,000 square feet of space. This includes 100,000 square feet of Turn-Key Datacenter space leased at an average of $210 per square foot, approximately 1,200 square feet of Powered Base Building space leased at an average of $78 per square foot, and approximately 42,000 square feet of non-technical space leased at $9 per square foot.