Digital Realty DLR recently announced the development of its second data center in Hong Kong. The facility — to be named Digital Realty Kin Chuen (HKG11) — will accommodate 24 megawatts of critical IT capacity. It will be a carrier-neutral data center in a purpose-built facility and is scheduled for a mid-2021 completion.
The HKG11 facility will encompass 21,000 square meter of space. It will have a total of 12 floors, with eight of those dedicated for customer deployments. It will offer better connectivity through close access to several facilities-based operators. The development effort of Digital Realty reflects the noteworthy expansion of PlatformDIGITAL™ across the Asia Pacific. The data-center REIT recently announced the groundbreaking of its new data center in Seoul, Korea.
Hong Kong has emerged as a leader in cloud readiness in the region. The city has occupied the top spot in the recent Cloud Readiness Index (CRI) based on cloud infrastructure, security, and regulation, per the Asia Cloud Computing Association (ACCA). Already a solid regional performer in fundamental readiness areas, like cloud regulation and infrastructure, the city has scope to fortify areas, like cloud governance and security, to spur broader and faster cloud adoption, per the study. Also, adoption of cloud services and digital transformation has increased amid the heightening reliance on technology in the wake of the coronavirus pandemic.
Digital Realty set foot in Hong Kong in 2012, with the buyout of Digital TKO (HKG10) situated within the Tsueng Kwan O industrial estate and efficient to deliver up to 18 megawatts of critical IT capacity. The latest facility is positioned in Kwai Chung, Hong Kong's fast-developing new data-center cluster, and will cater to diverse, multi-site workloads.
Apart from the latest developments in Hong Kong and Seoul, Digital Realty already enjoys a decent presence in the Asia-Pacific region, operating a network of data centers in Tokyo, Osaka, Singapore, Sydney and Melbourne.
With growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure, data-center REITs are witnessing a booming market worldwide. Furthermore, the estimated growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets will remain robust over the next five to six years. Apart from these, data centers are poised to benefit from the increased use of technology amid the coronavirus crisis. As such data-center REITs, including Digital Realty, Equinix, Inc. EQIX, CyrusOne Inc. CONE and CoreSite Realty Corporation COR, will keep witnessing significant demand.
Amid this, Digital Realty is poised to bank on the healthy market fundamentals through accretive acquisitions, development and expansion efforts. The company completed the acquisition of Interxion, a European provider of carrier and cloud-neutral colocation data-center services, in the first quarter and carried out a number of developments across the globe.
Such encouraging factors have helped Digital Realty’s shares gain 23.1%, so far this year, as against the industry’s decline of 9.7%.
However, Digital Realty faces stiff competition from several data-center developers, owners and operators, many of which enjoy ownership of similar assets in locations same as the company. As the data-center market has the potential of further growth, these REITs remain under aggressive pricing pressure.
Currently, the company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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