Interconnection and data-center REIT, Equinix, Inc. EQIX, has announced its plan to expand the company’s presence in London by building a new International Business Exchange™ (IBX) data center in the London Slough campus.
Specifically, the data center, which will be named LD7, will cost around $120 million (£90 million). It will be built in compliance with LEED gold certified standards which comes as part of the company’s effort in reducing carbon footprint for its global platform, as well as Equinix’s pledge to use 100% clean and renewable energy.
The new data center is slated to open in the second quarter of 2019. Per the company, it will offer interconnection and colocation to businesses which will aid their IT transformation measures and cloud adoption, as well as assist the digital infrastructure of the U.K.
Notably, with the latest data center, Equinix’s U.K. portfolio will have 12 IBXs. Further, including the existing expansion projects, the company will have invested more than $1.2 billion to build and expand its presence in the London metro area. This huge outlay comes as part of the company’s anticipation that London will eventually emerge as Europe's major financial hub and one of the greatest commercial cities of the world despite Brexit-related tension.
The development of LD7 will lead to the addition of 1,750 cabinets in the first phase and increase to 2,650 cabinets at full build. Customers will benefit as they will be able to securely interconnect with more than 1,000 businesses in London. These comprise capital market participants, insurers and electronic payments firms, in addition to the numerous network-service providers, and cloud and IT service providers.
Moreover, the interconnection bandwidth is projected to be up 48% per annum in Europe, reaching 1,900+Tbps by 2021, per Equinix's Global Interconnection Index Volume 2, contributing to approximately 23% of Interconnection Bandwidth, globally. Furthermore, compared to any other market in Europe, London is estimated to have the largest volume of data privately flowing between businesses despite Brexit. In fact, with an average growth rate of 52%, this metro city is set to contribute more than 35% of Europe's growth. All these only make the current expansion move of Equinix a strategic fit.
Notably, 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 also anticipated in the data-center market.
Currently, Equinix has a Zacks Rank #3 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
However, the stock has depreciated 1.4% over the past six months, as against 2.6% growth recorded by Real Estate industry.
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