Strong Data Center Demand Seen for 2010

More than a third of large corporate data center users in North America plan to expand their footprint in 2010, and many are expanding because they have run out of power, not space. Those were the key findings in survey data released Wednesday by Digital Realty Trust.

The survey of senior decision makers with responsibility for their companies’ data center strategies was conducted by Campos Research & Analysis for Digital Realty. Among the key findings:

• 83 percent of respondents are planning data center expansions in the next 12 to 24 months;
• 36 percent of respondents have definite plans to make those expansions during 2010;
• 73 percent of respondents plan to add two or more facilities as part of their data center expansions;

It’s not surprising that Digital Realty believes demand will be high, since the company is in the business of building and leasing data centers. But the customer survey’s major points were echoed by multiple panelists at Wednesday’s DataCenterDynamics New York event. 

Financing is a Factor
“Demand has been pretty steady,” said Dan Golding, Managing Director at DH Capital, an investment bank specialized in hosting and telecom deals. “The story has really been supply. It’s been very, very difficult for people to finance new data centers.”

At the national level, the pending demand for data center space may be three times greater than the available supply of quality space, according to Jim Kerrigan, the director of the data center practice at the real estate firm Grubb & Ellis. “All those deals that got shelved in 2009 because the CFO said no .. they’re going to happen,” said Kerrigan.

Digital Realty: $472 Million in 2009 Leasing

Data center developer Digital Realty Trust (DLR) said today that it signed leases representing more than $472 million in total cash contract value. In terms of square footage, the real estate investment trust commenced leases on 757,000 square feet of space, and signed leases for 434,000 square feet. That’s a substantial decline from 2008, when leasing hit 1.1 million square feet in both measures. But the 2009 results reflect a very different economic climate than the 2008 data

“We are very pleased with our leasing results for both the fourth quarter and full year 2009, particularly in light of last year’s challenging economic conditions,” said Michael Foust, CEO of Digital Realty Trust. “The measured approach we took over the year of aligning our redevelopment activity with real demand for our products, particularly Turn-Key Datacenter space, allowed us to manage our capital allocation and meet our return on investment objectives.

Digital Realty Signs First POD Design Client

A Fortune 100 financial services company is the first customer for Digital Realty Trust’s POD Architecture Services, the company’s new service to design and build data centers for enterprise clients.

Digital Realty (DLR) will manage the construction of 30,000 square feet of raised floor data center space, which will be owned and operated by the customer, who was not identified. The project is underway and projected completion date is summer 2010.

“The value proposition for customers is clear: by using our POD Architecture Services the customer is able to complete large data center projects, faster, more cost effectively and with lower risk than if they take a purely do-it-yourself approach,” said Chris Crosby, Senior Vice President, Corporate Development, at Digital Realty Trust. “When companies collaborate with us on their data center projects, they can save as much as tens of millions of dollars and months or even years by utilizing our supply chain, design and construction expertise, and other proprietary resources.

Mike Manos Leaves Digital Realty

Mike Manos has resigned from Digital Realty Trust, the company said today. Manos’ departure comes less than a year after joining the company from Microsoft in April 2009. Manos has been one of the data center industry’s most visible executives, and been a regular speaker at major industry conferences and events.

“I have decided to leave the company to focus a bit more on some personal work/life balance issues,” Manos said in a post at his Loose Bolts blog. “With this move comes a new role that I will talk more of in the coming days and weeks. Digital was a great experience and I feel blessed in having made some life-long friends there as well.”

“Mike has made a tremendous contribution to Digital Realty Trust and we greatly appreciate his efforts,” said Michael Foust, CEO of Digital Realty Trust. “We understand that this was a difficult, personal decision for him and we wish him the very best in his future endeavors.”

Digital Realty Sells $500 Million in Notes

Taking advantage of its strong credit rating and improving terms in the credit markets, Digital Realty Trust today said it had commenced a private debt placement of $500 million in senior unsecured notes. Digital Realty said it would use the money to repay borrowings under its revolving credit line, and acquire and develop additional properties.

The latest funding move comes just two weeks after Digital Realty sold $100 million in notes to Prudential. The company also positioned itself to sell up to $400 million in common stock through periodic “at the market” offerings, according to a Dec. 31 SEC filing.

In November Digital Realty Trust was awarded a BBB rating by both Standard & Poors and Fitch, and had previously recevied a Baa2 issuer ratings.

Digital Realty Targets Build-to-Suit Market

Continuing its expansion beyond the wholesale data center market, Digital Realty Trust said today that it will partner with KDC to offer build-to-suit data centers for corporate customers. Digital Realty (DLR), the largest developer of data center properties, said the two companies will partner to build custom data centers for clients, who then lease the building.

“For the first time, customers have a one-stop shop for their build-to-suit data center projects,” said Chris Crosby, Senior Vice President, Corporate Development at Digital Realty Trust. “Additionally, we are able to provide a lease for the custom data center (including the mechanical and electrical plant) without financial contingency, offering a simple financial model that saves customers significant capital.”

Build-to-suit projects are less risky than wholesale multi-tenant data center projects, which are typically built either on a speculative basis or based on a commitment from an anchor customer. In either scenario, the project goes forward before it is entirely leased. 

Terremark Leases Expansion Space in Dallas

Terremark Worldwide (TMRK) has built huge data centers around the world. But when it needed to expand its data center footprint in Dallas, it opted to lease “plug and play” space from Digital Realty Trust (DLR), the largest provider of wholesale data centers.

Digital Realty said this morning that Terremark has leased 10,000 square feet of space in one of its Dallas area facilities. The location was not announced, but a likely suspect is Digital’s huge new campus in Richardson, where it plans to build out up to 800,000 square feet of mission-critical space.

The deal underscores the appeal of Digital Realty’s Turn-key Datacenter program, which  offers customers finished raised-floor data center space, shifting the data center development costs from the tenant to the landlord. This approach allows for much quicker deployment than if the customer built a new facility on its own. 

Digital Realty Confirms LEED Platinum Site

Digital Realty Trust (DLR) has confirmed that its data center at 1525 Comstock in Santa Clara, Calif. has earned Platinum certification under the LEED (Leadership in Energy and Environmental Design) program from the U.S. Green Building Council.

This is the second LEED Platinum certification that Digital Realty Trust has earned for its properties in Santa Clara, as we noted in our Nov. 24 feature on the company’s Space Park campus.

Digital Realty now has eight LEED-certified facilities in the United States, with 12 additional facilities currently going through the LEED certification process. The company, which is the world’s largest operator of data center properties, also earned the first BREEAM Excellent environment rating in the data center industry for one of its facilities in the United Kingdom.

Digital Realty Pays $375M for New England Sites

Digital Realty has agreed to purchase three sites from Sentinel Data Centers, including this facility in Needham, Mass.

Digital Realty Trust (DLR) said today that it plans to acquire three data center properties in Massachusetts and Connecticut, paying $375 million for 550,000 square feet of buildings operated by Sentinel Data Centers. The deal expands Digital Realty’s footprint in the Boston market, where its three existing properties are fully leased.

Digital Realty also said it may sell up to $400 million in common stock through equity distribution agreements with Citigroup, Merrill Lynch, and Credit Suisse. The shares will be sold under a shelf registration agreement filed with the SEC in May 2009. Under a shelf registration, a company may sell securities in one or more separate offerings with the size, price and terms to be determined at the time of sale.