Digital Realty Trust (DLR) signed more than $1 billion in leases in 2008, leasing more than 1.1 million square feet of data center space. That includes 276,000 square feet of new leases signed during the fourth quarter, after the onset of the U.S. financial crisis.
Digital Realty, the world's largest landlord of data center properties, said its strong results were driven by the success of its Turn-key Datacenter program, which offers customers finished "plug and play" raised-floor data center space. The turn-key model 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.
That's been an attractive offering in the current economy, with companies seeking to conserve capital. By building out space and selling finished data centers, Digital Realty can lease the space at a higher rate. The company commenced 696,000 square feet of turn-key space in 2008, nearly five times the 2007 total of 134,000 square feet. Lease rates remained steady on a year-to-year basis at about $143 a square foot.
"Our Turn-Key Datacenter product demonstrates our leadership position as a cost effective, highly reliable IT infrastructure solution," said Chris Crosby, Senior Vice President of Sales and Technical Services for Digital Realty Trust. "Given the very difficult economic environment in the fourth quarter, we are especially proud of our continued strong leasing momentum and we believe it is indicative of the critical nature of datacenter facilities."
At 276,000 square feet, the volume of new leases in the fourth quarter was down slightly from 429,000 square feet in the same quarter in 2007. But the level of activity is a strong sign that Digital's enterprise customer base has not ceased expanding in the wake of the Wall Street meltdown that began in mid-September.
Digital Realty commenced leases totaling approximately 1,144,000 square feet in 2008, a 50 percent increase from calendar year 2007. A lease commences when the tenant occupies the facility, which often lags the lease signing by a few months. Here's the breakdown by property type:
- 696,000 square feet of Turn-Key Datacenter space leased at an average annual GAAP rental rate of $142.00 per square foot.
- 269,000 square feet of Powered Base Building at an average annual GAAP rental rate of $42.00 per square foot
- 180,000 square feet of non-technical space leased at an average annual GAAP rental rate of $22.00 per square foot.
Powered Base Building is undeveloped space with the power and fiber connectivity already in place, allowing for easy expansion.
"We are very pleased with both our fourth quarter and full year 2008 leasing results," commented Michael F. Foust, CEO of Digital Realty Trust. "With over $1 billion in contract value from new leasing in 2008, an increase of more than 100% over 2007, our ability to meet the demand for datacenter space continued to be an important source of growth for the Company. Looking ahead, the long-term duration of these leases, averaging approximately 8.5 years, further enhances DLR's unique blend of defensive characteristics and growth."