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Digital Realty Eyes Expansion in Europe With Paris Land Buyout

Zacks Equity Research

Digital Realty Trust, Inc. DLR recently announced the completion of a land purchase in Ferriers-en-Brie, east of Paris. The move comes as part of the company’s effort to reestablish its presence in this top-tier global metro. The company has shelled out approximately $6.9 million for the acquisition.

Digital Realty will immediately start constructing a new 12-megawatt data center on this 3.5-acre land parcel, with environmental and operational building permits being currently in place.

Notably, in the European region, Paris has emerged as a key technology and interconnection hub, and is well poised for substantial growth as there is a rapid rise of enterprise colocation and hyperscale customer demand. Therefore, amid local supply constraints, acquisition of this land parcel and subsequent building up of a new 12-megawatt data center seems a strategic fit.

Moreover, the company already operates a network of data centers across Europe. These facilities are situated in Amsterdam, Dublin, London, Geneva, Frankfurt and Manchester. Together with the latest acquisition, this portfolio is expected to help the company strengthen its foothold in the European region for further growth. In fact, Digital Realty now has more than 200 data centers across 14 countries on five continents, owing to its focus on building a global footprint.

Data-center REITs are expected to continue experiencing a boom market with growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure. Also, the estimated growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets will remain robust over the next five to eight years. These factors are anticipated to give significant impetus for growth to data-center REITs, including Digital Realty, Equinix, Inc. EQIX, CyrusOne Inc. CONE and CoreSite Realty Corporation COR.

Specifically, Digital Realty is poised to benefit from the solid demand for data centers, as well as accretive acquisitions and development efforts. Nevertheless, the company faces intense competition in the industry. Amid this, aggressive pricing pressure will also likely persist in the upcoming period. Furthermore, the company has a substantial debt burden.

Digital Realty currently carries a Zacks Rank #4 (Sell). Shares of the company have gained 14.6%, while its industry has rallied 21.6%, year to date.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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