Will Facebook Renew Its Data Center Leases in Ashburn?

Social network contributes one-fifth of DuPont Fabros’s total rent income and some of its leases are up in 2018.

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Will Facebook Renew Its Data Center Leases in Ashburn?
A collage of profile pictures makes up a wall in the break room at Facebook’s data center in Forest City, North Carolina. (Photo by Rainier Ehrhardt/Getty Images)

One of the biggest things DuPont Fabros Technology execs will be focused on this year is trying to ensure that Facebook doesn’t vacate its Northern Virginia data centers as some of its leases start expiring in 2018.

The social network giant has numerous leases in four of the wholesale data center provider’s Ashburn facilities, cumulatively representing north of 20 percent of the provider’s total annual rent income. The only customer responsible for a bigger portion of DuPont Fabros’s revenue is Microsoft, which contributes 25.4 percent.

“Renewal discussions are an important 2017 focus as our first lease expiration with Facebook occurs in mid-2018,” DuPont Fabros CEO, Chris Eldgredge, said on the call. “The plan is to engage in discussions that lead to a successful renewal.”

More on DuPont Fabros's Q4 and 2016 earningsAfter Beating Its Own Leasing Record in 2016, DuPont Fabros Keeps Foot on Gas

Some of the Facebook data center leases in three older Ashburn facilities (ACC4, ACC5, and ACC6) are due to expire in 2018, some in 2019, and some in 2020 and 2021. The lease that’s up for renewal next year actually represents the smallest percentage of annual rent (2.2 percent).

Still, non-renewal would mean lowering profit guidance and possibly negative impact on the data center REIT’s stock. DuPont Fabros’s profit from Facebook leases would shrink even if the social network does renew – its leases at two of the facilities are “we’ll above current market rates – it would not shrink as much.

See also: LinkedIn Vacates Lots of Space at Equinix Data Centers

If the current market dynamics remain, chances are DuPont Fabros would not have too much trouble filling the space that may be vacated by Facebook next year. Northern Virginia is the hottest data center market in the country and one of the hottest in the world, and hyper-scale cloud providers, such as Microsoft, are hungry for capacity in key locations like that.

Asked whether it would be difficult for the provider to backfill space potentially vacated by Facebook, Jim Kerrigan, managing principal at the data center real-estate brokerage North American Data Centers, said, “Not at all. Demand is still strong right now.”

A Facebook spokesperson declined to comment.

See alsoHow to Get a Data Center Job at Facebook

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