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Digital Realty Sees 'Significant' Surge in Demand

Data center demand is likely to surge in the second half of 2008, as U.S. enterprise companies indicate they will be increasing both the number and size of their data center projects in the next 12 months, according to new research by Digital Realty Trust. The research findings, coming on the heels of a strong first quarter, were among the factors cited as Digital Realty increased its revenue projections for 2008.

"I think we're going to see strong demand for the next 24 to 36 months," said Digital Realty CEO Mike Foust. "By all indicators, these data centers are not discretionary, they're required by these companies for continued profitability. We're also seeing a pretty significant shortfall of supply."

Foust said that the company's internal research suggests that in some key markets new supply will be adequate to meet just 50 percent of the expected demand. Digital Realty (DLR) became the third data center specialist to raise its revenue guidance in recent weeks, following the lead of colocation providers Equinix (EQIX) and Switch and Data (SDXC).

Posted by Rich Miller May 08, 2008 | Permalink | Newsletter

May 01, 2008

Digital Realty to Publish PUE Data for Its Sites

Digital Realty Trust, Inc. (DLR) has begun publishing energy efficiency data about its data center facilities using the Power Usage Effectiveness (PUE) metric. Digital Realty said it is now using PUE for measuring and reporting energy efficiency in its portfolio of 70 facilities spanning 12.6 million square feet across North America and Europe. The company said it will also publish benchmarks that will support industry-wide initiatives to make datacenters greener and reduce expenditures on energy.

PUE is an emerging standard promoted by The Green Grid and others in the data center industry to provide a consistent way to measure the ratio of power delivered to IT equipment versus the total amount of power used by the facility. PUE allows data center managers to calculate how much power is driving the actual IT equipment versus non-IT elements such as cooling and lighting.

"PUE is a compelling way to measure energy efficiency in datacenter facilities because it offers our industry an apples-to-apples comparison similar to the miles-per-gallon (MPG) fuel efficiency rating that the auto industry uses," said Jim Smith, Vice President of Engineering at Digital Realty Trust. "Regardless of whether you are driving a pickup truck or a sports car, miles per gallon is a clear standard for measuring efficiency across all makes and models – and PUE provides that same kind of standard to evaluating efficiency in the datacenter world."

So which of Digital Realty's data centers have the best PUE?

Posted by Rich Miller May 01, 2008 | Permalink | Newsletter

April 28, 2008

Digital Realty Reports Strong Leasing

Digital Realty Trust (DLR), the largest data center REIT, reported strong leasing for the first quarter ending March 31. The company commenced leases totaling 334,800 rentable square feet of space, and signed new leases for 260,200 square feet of space. A lease commences when the tenant occupies the facility, which often lags the lease signing by a few months.

The company's data center leases involved two classes of property: Turn-Key Datacenter space, which is fully developed for data center use, and Powered Base Building (PBB), which is undeveloped space with the power and fiber connectivity already in place, allowing for easy expansion. Here's a breakdown of the space and leasing rates for the quarter.:

Digital Realty commenced leases on 256,200 square feet of Turn-Key space leased at an average annual GAAP rental rate of $119.25 per square foot, and leased 46,300 square feet of Powered Base Building space leased at an average annual GAAP rental rate of $52.42 per square foot, and 32,300 square feet of non-technical space leased at an average annual GAAP rental rate of $19.31 per square foot.

Leases signed during the quarter totaled 106,400 square feet of Turn-Key Datacenter space leased at an average rate of $100.05 per square foot, nearly 120,000 square feet of Powered Base Building(TM) space leased at rate of $67.60 per square foot, and 33,800 square feet of non-technical space leased at $25.93 per square foot.

The total amount of space leased was down slightly from the fourth quarter of 2007, when Digital Realty had a record total of 429,000 square feet. But the company's leasing volume suggests that demand for data center space has not been diminished by the economic slowdown.

Posted by Rich Miller April 28, 2008 | Permalink | Newsletter

April 10, 2008

Data Center REITs Get Respect

Real estate investment trusts (REITs) focusing on the data center sector are a pretty exclusive group. It's a club with only two members - Digital Realty Trust (DLR) and Dupont Fabros Technology (DFT). The investment potential of these two REITs was the subject of an Associated Press article yesterday, which appeared in a number of daily newspapers around the nation. The story notes that securities analysts from Raymond James, UBS AG and KeyBanc Capital Markets are all bullish on the sector.

The analysts' sentiments closely track the key findings in our February series Crunch Time: The Credit Crunch and Data Centers, particularly the segment on The Incumbent Advantage. Investors interested in the sector will also want to check out our review of data center stock performance in 2007 and the first quarter of 2008.

Posted by Rich Miller April 10, 2008 | Permalink | Newsletter

April 07, 2008

UnitedLayer Expands at 200 Paul, Again

For several years now, multi-tenant data center operators have cited existing customers seeking additional data center space as a factor in their expansions. A compelling example of this trend is seen in UnitedLayer's continued expansion at 200 Paul Avenue in San Francisco.

Last week UnitedLayer announced its third expansion in the last seven months at 200 Paul, the carrier hotel owned by Digital Realty Trust (DLR). UnitedLayer has leased an additional 6,000 square feet of space through Digital's Turn-Key Datacenter program.

"We have seen an exciting growth trend across our service offerings," said Richard Donaldson, COO of UnitedLayer. "The acquisition of this space is a tremendous boon to our customers and an excellent opportunity to offer more facility options to current and future clients."

Posted by Rich Miller April 07, 2008 | Permalink | Newsletter

February 11, 2008

UIS Acquiring Data Center Space in Dallas

Unified Infrastructure Services, a significant new player in the Dallas data center market, has signed a lease for 22,000 square feet of space at a Digital Realty Trust (DLR) building in Carrollton, Texas. Unified Infrastructure said its eight-year lease of Turn-Key Datacenter space at 4025 Midway Road was valued at $35 million.

The deal follows UIS' purchase of 2020 Live Oak, a carrier hotel in downtown Dallas, and gives the company more than 200,000 square feet of available data center space in the Dallas market. The purchase price for 2020 Live Oak wasn't disclosed, but local reports said the property had doubled in value over the course of three sales in the past 12 months.

UIS says it also has purchased a 30,000 square foot Dallas data center property "currently occupied by a large Internet company." All three deals took place within a three-week span in late November and early December, according to the UIS news page. Lance Smith, who previously worked with ACS and Atos Origin, joined UIS in October as its vice president of operations.

UIS' buying spree is designed to capitalize on demand in the Dallas data center market, which has seen a flurry of deals in the past eight months. Dataside recently announced plans to build a fifth data center in the Dallas market, while Databank, Securus, Skyrise Properties and Behringer Harvard have all acquired data center space in Dallas since last summer.

Posted by Rich Miller February 11, 2008 | Permalink | Newsletter

February 04, 2008

Digital Realty Buying Two New Jersey Properties

Last week we noted the strong data center activity in central New Jersey, particularly in Piscataway and Franklin townships. Things are getting even hotter. Digital Realty Trust (DLR) has signed contracts to buy two properties for conversion to data centers, one in Piscatway and one in Franklin Township, according to a recent SEC filing.

On Nov. 26 Digital Realty signed an agreement to buy 365 South Randolphville Road in Piscataway, NJ for $20.2 million. The includes an existing 270,000 square feet building, which includes 260,000 square feet of industrial/warehouse space once used by the Simmons Bedding Co., and about 10,000 square feet of office and other space. The acquisition is expected to close this month, and will be financed with borrowings from Digital's revolving credit facility.

Posted by Rich Miller February 04, 2008 | Permalink | Newsletter

February 01, 2008

Digital Realty Offers $300M in Preferred Stock

Digital Realty Trust (DLR) will sell 12 million shares of preferred stock in hopes of raising $300 million. Digital Realty will use the funds to pay down its credit facility, giving it more flexibility to pursue acquire new properties and convert its development space into Turn-Key Datacenter space. The company says it is "actively pursuing multiple opportunities for potential acquisitions, with due diligence and negotiations at different stages of advancement."

The shares of Series D Cumulative Convertible Preferred Stock will be convertible for shares of Digital Realty Trust common stock, which closed Thursday at $35.76. See Globe Street for additional details.

Posted by Rich Miller February 01, 2008 | Permalink | Newsletter

January 30, 2008

Digital to Build HSBC Data Center in London

Digital Realty Trust (DLR) has begun construction on a custom data center facility in London for HSBC (HBC), the global banking company. The new HSBC facility will be located on a development site in suburban London that was acquired by Digital Realty in April 2007. HSBC and Digital Realty Trust have signed a long-term lease agreement for the build-to-suit data project, which is expected to be completed in late 2008.

The announcement is the latest big deal in a blockbuster January for Digital Realty Trust. Despite concern about a possible slowdown in enterprise IT spending and tight credit in the commercial real estate market, Digital Realty has leased three entire data center buildings already in 2008.

"A project of this magnitude requires a high level of specialized expertise, which is why we put such an emphasis on selecting the right partner," said Roy Adorni, Global Head of Data Center Services for HSBC. "Having a partner for this datacentre project with the experience and resources that Digital Realty Trust offers is a major asset for us." Adorni said Digital Realty's expertise will be critical in ensuring that "the project goes according to plan, meets all of our technical needs, and is completed on time and on budget."

Posted by Rich Miller January 30, 2008 | Permalink | Newsletter

January 24, 2008

Video: Digital Realty on Green Data Centers

In this 10 minute video, InfoWorld's Ted Samson interviews Digital Realty Trust's Jim Smith about the "green data center" movement. Smith, the VP of engineering for Digital Realty, discusses the characteristics of green data centers, and the business value of making facilities more energy-efficient. "All these efficiencies are great for the bottom line," says Smith.

For additional information, read more about Digital Realty's approach to energy efficiency as well as our coverage of green data centers.

Posted by Rich Miller January 24, 2008 | Permalink | Newsletter

January 23, 2008

Recent Data Center Leasing Rates

In its latest SEC filing, Digital Realty Trust (DLR) has shared information about its leasing rates for 2007. The data aggregates rates for leases that were signed and commenced in the fourth quarter and for the year as a whole. A lease commences when the tenant occupies the facility, which often lags the lease signing by a few months.

New Signed Leases: For the quarter ending Dec. 31, 2007, Digital Realty signed leases for more than 429,000 square feet of space. All lease rates listed are GAAP (Generally Accepted Accounting Principles). Here's how that breaks down by lease type and rate:

245,000 square feet of Turn-Key Datacenter space leased at an average annual rental rate of $125.00 per square foot. Turn-Key space announced in the fourth quarter included leases for United Layer in San Francisco, Carpathia Hosting in northern Virginia and Savvis Inc. in Boston and Chicago. For the full year, Digital leased 435,000 square feet of Turn-Key space for an average $130.00 per square foot.

112,000 square feet of Powered Base Building space leased at an average annual GAAP rental rate of $40.65 per square foot. Full-year leasing for Powered Base Building space totaled 419,000 square feet at $38 per square foot.

72,000 square feet of non-technical space leased at an average annual GAAP rental rate of $20.90 per square foot. For all of 2007, Digital leased 144,000 square feet of non-technical space at an average annual rate of $21.50 per square foot

Turn-Key Datacenter 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.

Posted by Rich Miller January 23, 2008 | Permalink | Newsletter

January 22, 2008

Two Huge Leases for Digital Realty Trust

Digital Realty Trust (DLR) has signed two major leases totaling approximately 210,500 square feet at projects in Santa Clara, California and Dublin, Ireland, the company said today. In each case, a single tenant has leased an entire building under development.

In Santa Clara, Digital Realty has signed a long term lease for Turn-Key Datacenter space with "a leading Web 2.0 social networking company" for an 86,000 square foot single building redevelopment project. Digital did not identify the tenant, but the likely suspect is Facebook, which has been rapidly expanding its data center infrastructure.

In October Facebook leased data center space in Ashburn, Virginia in a new facility built by DuPont Fabros Technology (DFT). Last month Jonathan Heiliger, the vice president of Technical Operations at Facebook, indicated that the company was seeking additional space. "In addition to the Virginia facility, we are in the process of expanding data center space on the West Coast," Heiliger said in the comment section of a post at Data Center Knowledge.

Posted by Rich Miller January 22, 2008 | Permalink | Newsletter

January 07, 2008

Digital Realty Buys More London Properties

Digital Realty Trust (DLR) has purchased a business park in suburban London, and will convert one of the facilities into a data center, the company said today. Digital Realty's purchase of Foxboro Business Park for $45.1 million will help meet strong demand for mission-critical space in the greater London market.

The Foxboro property includes three buildings, two of which are fully leased. Foxboro Unit 1, an existing 20,000 square foot data center, is fully leased to a "leading international geophysical company." Unit 2 is a 31,000 square foot warehouse that is 100 percent leased to a home appliance manufacturer. Unit 3 totals over 96,000 square feet of vacant space, which Digital Realty will convert into data center space using its phased Turn-Key Datacenter program.

The Foxboro deal comes just three weeks after Digital purchased Cressex 1, a 51,000 square foot building in suburban London that will be converted into Turn-Key Datacenter space. The expansion reflects the strong demand for data center space in London, where supply has been tight for several years and infrastructure is being beefed up ahead of the 2012 Olympics.

Posted by Rich Miller January 07, 2008 | Permalink | Newsletter