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Equinix to Expand Presence in Singapore With New Data Center

Zacks Equity Research

Equinix, Inc. EQIX announced its plan to expand in Singapore. This Interconnection and data-center REIT announced an $85-million investment to build its fourth International Business Exchange (IBX) data center in Singapore.

The data center named SG4 is slated to open in the fourth quarter of 2019. This center will offer interconnection, and data center services to businesses for supporting their IT transformation and cloud adoption efforts while enhancing the digital infrastructure of Singapore.

The facility will offer initial capacity of 1,400 cabinets in the first phase and more than 4,000 cabinets at full build out. It will be located at the east of Singapore in one of the country's five data center clusters — Tai Seng Industrial Estate. Moreover, it will be directly connected to the three present Equinix IBX data centers in Singapore through low-latency dark fiber links.

Customers will be able to securely interconnect with around 600 companies, including financial services, cloud services, biomedical sciences, IT, communications, media, physical sciences and engineering. Further, SG4 will offer software-defined interconnection through the Equinix Cloud Exchange Fabric to several businesses — including some of the prime Cloud Service Providers (CSPs).

Notably, amid significant growth of the digital business in the Asia Pacific region, Singapore has emerged as a key hub for several organizations, and is experiencing a decent demand for cloud and interconnection services. Moreover, the interconnection bandwidth capacity in Singapore is projected to more than quadruple by 2021, reaching 394 Tbps, denoting a CAGR of 47%, according to Equinix's Global Interconnection Index Volume 2. All these make the current expansion move by Equinix to be well chalked out.

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. Further, 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 an improved outlook for economic growth, will significantly aid data-center REITs such as Equinix as well as Digital Realty Trust Inc. DLR, 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, pricing pressure is anticipated in the data-center market.

Currently, Equinix carries 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 6.5% in the past month against 6.2% decline of the Real Estate industry.

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