Interconnection and data-center REIT, Equinix, Inc. EQIX recently announced plans to expand in Europe by building International Business Exchange™ (IBX) data center in Helsinki, Finland. The data center will offer interconnection and colocation services to businesses which will help in their IT transformation measure.
Named HE7, the data center is slated to open in the second quarter of 2019. The first phase will cost around $20 million (€17 million). It will fall under Platform Equinix™, comprising 200 data centers in 52 markets worldwide.
The HE7 will lead to the addition of 250 cabinets in the first phase and 1,475 cabinets at full build. Customers will be able to securely interconnect with more than 135 businesses in Finland, majority being financial services and content and digital media companies. Further, HE7 will offer direct, secure and dynamic software-defined interconnection through the Equinix Cloud Exchange™ Fabric to several businesses including some of the prime Cloud Service Providers (CSPs).
Notably, Helsinki serves as a digital gateway connecting Russia, the Baltic states and the rest of Europe through direct digital routes. As such, it is a preferred location for companies providing solutions globally and require interconnection to CSPs, the company said in its press release.
Moreover, the interconnection bandwidth is projected to rise 48% per annum in Europe, reaching 1,900+Tbps by 2021, per Equinix's Global Interconnection Index (GXI) Volume 2, contributing to approximately 23% of Interconnection Bandwidth globally. All these make the current expansion move by Equinix strategic.
Admittedly, data-center REITs are experiencing a boom with growing popularity of cloud computing, Internet of Things and big data, as well as the use of third-party IT infrastructure by several companies. 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.
In fact, demand has been outpacing supply in top tier data-center markets. These markets are absorbing new construction at an accelerated pace despite enjoying high occupancy. This, along with improved outlook for economic growth, will significantly propel growth of data-center REITs, such as Digital Realty Trust Inc. DLR, Equinix, CyrusOne Inc. CONE, CoreSite Realty Corp. COR and others.
Nevertheless, given the solid growth potential of the data-center real estate market, competition may intensify in the upcoming period from existing as well as new players. Amid these, an aggressive pricing pressure is anticipated in the data-center market.
Currently, Equinix has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, the stock has depreciated 2.8% in the past month against 3% growth recorded by the Real Estate industry.
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