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Digital Realty Gets Nod for Garland Data-Center Expansion

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In an effort to leverage on the rising demand for data-center space in Garland, data-center REIT Digital Realty Trust Inc. DLR is planning to expand its project in the area.

The company, which already received an approval last summer for developing a data-center campus, worth $1 billion, on a 47.5-acre site, has recently received the city authority’s approval for expansion of this project. This will involve an addition of 16 acres to the earlier site and an investment increase of nearly $400 million.

Situated northeast of the intersection of Campbell Road and the President George Bush Turnpike, this expanded 64-acre campus is expected to be fully developed, in phases, over a 20-year period, and operate more than 160 megawatts of critical IT load. The first phase’s design is in progress, and will be constructed and operational by 2021. In fact, there will be five phases, comprising around 280,000 square feet, and operate at 32 megawatts of critical IT load.

The above-mentioned move is a strategic fit for Digital Realty. In fact, there is a rising demand for data-center facilities in Garland which is fast turning out as the data-center hub for the North Texas market. In fact, currently, there are long-term development commitments of more than 240 megawatts. And at build out, the data-center campus of Digital Realty will be one of the largest in Dallas County.

Going forward, data-center REITs will likely 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-eight years.

These factors, along with an improved outlook for economic growth, are anticipated to substantially drive growth of data-center REITs, including Digital Realty, Equinix, Inc. EQIX, CyrusOne Inc. CONE and CoreSite Realty Corporation COR, and others.

Specifically, Digital Realty is poised to benefit from this solid demand for data centers through accretive acquisitions and development efforts. The company also focuses on maintaining an investment-grade balance sheet, enjoys ample liquidity and has a well-laddered debt maturity schedule. Nevertheless, aggressive pricing pressure is likely to continue in the upcoming period. Moreover, the company has a substantial debt burden and hence, rate hike adds to its woes.

Shares of Digital Realty have outperformed the industry it belongs to, in the past three months. The stock has gained 15.5% compared with the industry’s rally of 8.2%.

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