CoreSite has commenced construction on a massive new Silicon Valley data center, all of which the company said was pre-leased to an existing "strategic customer" it did not name. The 137,000-square-foot powered shell is on its Santa Clara campus. The SV6 data center development will require an estimated $27 million to complete, with the provider having spent about $1.2 million on it at the end of the first quarter.
In Silicon Valley, demand for data center space is outpacing supply making it a landlord’s market. Demand is about three or four times bigger than supply, according to Cushman Wakefield. The makeup is vastly different from one year ago, when the market was flooded with sublease space leading to pricing pressure. In addition to CoreSite's build, providers like Vantage Data Centers have also recently noted the market's upswing.
Silicon Valley data centers are being sought after by companies from the U.S. and from abroad. Alibaba announced it was opening up its first U.S. data center in Silicon Valley in March but did not specify who its provider would be, and other Chinese tech heavyweights are shopping for data center space in the market as well.
CoreSite reported first quarter earnings last week, noting close to 17 percent revenue growth and 18 percent growth in data center revenue year over year. Its revenue was close to $75 million in the quarter, putting it well on track to cross the $300 million barrier in annual revenue. The company has grown nearly four times its size five years ago: it reported $74 million in revenue in 2010.
Leasing was healthy during the quarter. CoreSite executed over 54,000 square feet of new and expansion leases, representing close to $9 million of annualized rent, averaging $163 per square foot annually. It has started another 61,000 square feet worth of new and expansion leases at a rate of $152 per square foot.
In the previous quarter, CoreSite said the strategy was to expand in its core markets rather than geographically. In the quarter, it added 44,000 square feet in Virginia. In addition to the Silicon Valley data center, it currently has over 130,000 square feet of space under construction across Virginia, Chicago, New York, and Boston.
“We had a solid first quarter, both in financial results and operational performance, reflecting continued execution of our business plan,” Tom Ray, CoreSite’s CEO, said in a statement. “We believe that CoreSite remains well positioned within our industry, and that the supply and demand dynamics in the markets we serve remain favorable.”