Thursday, March 12, 2009

Data Centers Give a Positive Jolt to Moribund CRE Market

from CoStar Realty Information:

>>Practically alone among commercial real estate asset types, the data center property market still elicits glowing superlatives like "rosy outlook" and "healthy growth" from investors and Wall Street analysts


That opens a wide door for wholesale data space providers such as real estate investment trusts Digital Realty Trust (NYSE: DLR) and DuPont Fabros Technology Inc. (NYSE: DFT), along with outsourcing operators (and DLR and DFT tenants)Savvis Inc., which provides IT and managed computing, including virtualization and "cloud" computing; Equinix, Inc., which provides colocation and IT support, among others. Colocation centers, also called telecom or carrier hotels, usually involve multiple enterprise, Internet and telecommunications tenants.

"We believe we’ll see an increase in outsourcing as data center space gets tighter and capital spending drains up," AFCOM said. "This being said, data center managers will have to work more efficiently through projects such as consolidation and outsourcing, and begin to look more seriously at technologies such as utility and cloud computing."

Data Center REITs Weather Storm

Wall Street seems to agree. In a Jan. 29 report, UBS Investment Research analysts Omotayo Okusanya and Jeffrey Spector said the global outlook for data center property is "attractive" for 2009. The analysts, citing a recent report by Tier 1 Research, said rental rates and occupancies are expected to remain healthy. Tier 1 Research forecasts that while overall spending by corporate IT departments will decline this year, demand for data center space will grow at 13% while supply will grow only about 5.25%.

"A primary driver of demand growth has been an uptick in demand from enterprises as they forego their construction plans and outsource given capex [capital expenditure] constraints due to the credit crunch," the UBS analysts said. "The global [supply] imbalance is expected to continue into 2012, creating ‘pricing insanity’ in key markets by 2010/2011."

No comments: