BT Global Leases Space from Digital Realty

BT Global Financial Services has leased data center space from Digital Realty Trust, Inc. (DLR) in the New York City area to support the company’s IT infrastructure. The lease was for finished data center space through Digital Realty’s Turnkey Datacenter program, continuing a recent trend in which tenants have opted for move-in ready raised floor space.

Digital Realty didn’t specify the size or location of the lease. The company’s New York metro holdings include space at the 111 Eighth Avenue carrier hotel as well as New Jersey facilities in Weehawken, Piscataway and Franklin Township.

Digital Realty Trust Reclaims Chicago Space

Digital Realty Trust (DLR) said today that it had reclaimed 120,000 square feet of prime space in the company’s Chicago carrier hotel at 350 East Cermak (pictured at left)  which it will redevelop and lease through its Turn-Key Datacenter program. The announcement was included in Digital Realty’s third-quarter earnings report. The company negotiated an agreement to take back the space from Qwest (Q), which leased the space but was not using it as a data center, in exchange for a one-time payment of approximately $14 million.

The additional revenue from the Qwest agreement prompted Digital Realty to raise its financial guidance for 2008 for Funds From Operations (FFO), the key financial measurement for real estate investment trusts. Digital Realty now expects FFO in a range of $2.58 to $2.60 per share, up from $2.40 to $2.50 per share. For 2009, Digital Realty expects FFO of between $2.75 and $2.90 per share.

DLR: Data Centers Not Discretionary Spending

Why would companies continue to invest heavily in data centers in the midst of a global credit crunch and steep losses in the stock market? It doesn’t always make sense. And yet they do. 

The quarter ending Sept. 30 was the best quarter ever for new leasing at Digital Realty Trust (DLR), the world’s largest owner of data center properties. Last week the company announced new leases of data center space with IBM, Equinix, Starwood Hotels and the Children’s Medical Center of Dallas.      

“We are not seeing a reduction in demand, even with the consolidation in the financial sector,” said Chris Crosby, Senior VIce President of Digital Realty Trust. “These are really not discretionary expenses for these companies. You definitely have a longer decision-making process, and decisions are moving higher up in the customer organization.

“But these (data center-based) applications are driving significant revenues for these companies,” Crosby added. “Some of the highest margin businesses these companies have are coming out of the data center. As long as you are in the bucket where you’re driving revenue or supporting the business, you’re in good shape.”

The factors supporting continued data center demand can be counterintuitive. Crosby describes them as “contrarian drivers” of market activity. “In financial services, you have a lot of turmoil,” said Crosby. “That volatility in the stock market means the volume of trading is way up. Commissions on trades are a huge revenue driver for financial services companies. Computers do all this stuff.” Electronic trades represented 22 percent of volume in 2007, and have almost certainly trended higher this year.

IBM Leases Paris Space from Digital Realty

IBM has signed a lease for “plug-n-play” data center space in a Digital Realty Trust facility in suburban Paris, the two companies said today. IBM says it will establish a new hosting data center in the property, which was leased through Digital Realty’s Turn-Key Datacenter program, which provides tenants with finished raised floor data center space.

IBM is one of the world’s leading data center builders, managing more than 8 million square feet of raised floor space. The Paris lease raises an interesting question: given its in-house capabilities, why would IBM lease pre-built space from Digital Realty? The answer: to bring space online quickly to meet customer demand in a hot market.   

“In terms of speed to market, with our Turn-Key Datacentre product based on our POD Architecture we are able to meet the datacentre requirements of customers such as IBM in six to eight weeks from the time we come to an agreement - well ahead of current industry standards,” said Bernard Geoghegan, Senior Vice President, Europe of Digital Realty Trust.

Digital Realty Reports Record Leasing Activity

Digital Realty Trust, Inc. (DLR) reported extremely strong leasing activity for the third quarter of 2008, signing new leases for 478,000 square feet of space at some of its highest rates yet. That’s the highest volume of quarterly activity to date for the company, which is the largest landlord of data center properties.

Digital Realty’s strong leasing offers evidence of the resiliency of the data center sector in the midst of deep economic uncertainty. “Given the current economic environment, we are especially proud of our strong leasing performance and believe it is indicative of the critical nature of data center facilities,” said Chris Crosby, Senior Vice President of Sales and Technical Services for Digital Realty.

Here’s a breakdown on the volume and pricing of Digital Realty’s third quarter leases:

• 262,000 square feet of Turn-Key Datacenter space leased at an average annual GAAP rental rate of approximately $155 per square foot.
• 171,000 square feet of Powered Base Building space at an average annual GAAP rental rate of $47 per square foot.
• 45,000 square feet of non-technical space leased at an average annual GAAP rental rate of approximately $13 per square foot.

Turn-Key Datacenter space is fully developed for data center use, while Powered Base Building is undeveloped space with the power and fiber connectivity already in place, allowing for easy expansion. In recent quarters, demand for finished data center space has surged as companies have sought to preserve capital.

Securing Diesel Delivery in Disasters

If a major disaster leaves you without utility power for days, will you be able to get refills of diesel fuel for your generators?  Digital Realty Trust isn’t taking any chances. The company has signed an exclusive agreement with Foster Fuels to provide  emergency fuel delivery for generators at any of Digital Realty Trust’s Turn-Key data center facilities in the U.S.

Digital Realty, which is the world’s largest landlord of data center facilities, said the new service was “unique in the data center industry” and will ensure that its customers can keep their facilities online even during lengthy utility outages.

The scenario is not without precedent. After the Sept. 11 terrorist attacks in New York, the Telehouse carrier hotel facility at 25 Broadway experienced diesel fuel shortages and generator problems that left its customers offline for more than two days. In the 2005 aftermath of Hurricane Katrina, New Orleans colocation provider Zipa had to scramble to find diesel fuel at a time when the city was without power.

Digital Realty Trust (DLR) is seeking to address those type of worst-case scenarios with the agreement with Foster Fuels, which allows Digital’s Turn-Key Datacenter customers to obtain emergency fuel emergency fuel within 24 hours.

Jim Smith Named CTO at Digital Realty

When InfoWorld reviewed the accomplishments of Digital Realty Trust Vice President of Engineering Jim Smith, it named him one of the top 25 chief technology officers. Digital Realty clearly agrees, and today announced that it has promoted Smith to CTO, making him the first person to hold the title at the company. Smith has been highly visible in implementing Digital Realty Trust’s green data center strategy.

“Jim’s work has had a profound impact on the way we design and operate all of our facilities, and this promotion to CTO will allow him to play an even greater role in how we utilize technology to drive increasing value for our customers by reducing costs, increasing operating efficiencies, and developing Green operating environments,” said Michael Foust, CEO of Digital Realty Trust. “Digital Realty Trust is changing the face of the datacenter industry, and he is a big part of our success story.”

In the past three years, Digital Realty Trust has delivered more than 100 megawatts of UPS capacity on over 40 datacenter projects in North America and Europe, including the industry’s first LEED Gold certified data center. Smith has a BSc in Chemistry from Fort Lewis College and an MBA from London Business School.

Higher Leasing Rates for Digital Data Centers

Are leasing rates for “plug and play” data center space trending higher? The largest landlord of data center properties, Digital Realty Trust (DLR), reported some of its strongest leasing rates yet in its second quarter earnings this morning. Citing that performance, Digital Realty said it is increasing its guidance on funds from operations (FFO) for 2008 by 5 cents to a range of $2.40 to $2.50. FFO is a key performance gauge for real estate investment trusts.

Digital Realty commenced leases on 86,200 square feet of Turn-Key Datacenter space in the quarter at an average annual rate of approximately $185 per square foot. The company also signed new leases for 106,700 square feet of Turn-Key space at an average rate of $173 per square foot. A lease commences when the tenant occupies the facility, which often lags the lease signing by a few months.

Those rates are substantially higher than the average rates seen in recent quarters. In the first quarter, new leases averaged $100 per square foot, while commenced leases tracked at $119 a square foot. These rates often vary from quarter to quarter based on regional differences in leasing rates. Strong leasing activity in a high-demand market like London, for example, can lead to higher average leasing rates.