2018 Real Estate Forecast

Posted on Jan 12, 2018

Data Center Real Estate Review 2017

Read our report that recaps 2017 market activity and highlights the trends that will shape data center real estate in 2018.

Download the 2018 Report (PDF) »


Overview of Issues Impacting Data Centers During 2017

  • Investmentent activity in data centers surpassed all other years during 2017 at over $20 BN.
  • Multi Tenant Data Center (MTDC) inventory under construction is almost double of what it was 12 months ago led by Northern Virginia.
  • Significant uptick in private equity and venture capital looking at data center investments.
  • Overall rental rates and concessions continue to hold steady, while construction costs have declined. In addition there are significant variances between resiliency and density.
  • While hyperscale leasing is down compared to 2016, there are several properties under contract or recently purchased by MTDC developers that leasing activity from hyperscalesmay prove to be higherthan is divulged.
  • Facebook and Apple return to leasing large blocks of MTDC as opposed to building their own after taking several years hiatus.
  • There are a significant number of wholesale tenants that have leases expiring in 2018 & 2019.
  • Significant uptick of colocation companies looking to lease at MTDC properties in several markets.
  • Assimilation of 2017 mergers & acquisitions will likely see some fall out of non-core data centers, and sale- leaseback of large corporate data centers will continue to provide shadow inventory in 2018.
  • Amazon coupled with Google expanding outside of MTDC in several projects in Northern Virginia.
  • Ashburn continued to dominate leasing activity during 2017.
  • Several land acquisitions during 2017 in Loudoun County including; Google (148 acres), QTS (52 acres), Sentinel (100 acres), Vantage (42 acres), and Compass Data Centers (120 acres).
  • Land prices in Ashburn have sold as high as $29/sf (2017) compared to Elk Grove Village at $27sf (2013) compared to Plano at $17/sf. Other sites within various submarkets may be lower.
  • Slow down in leasing activity in Chicago in 2016 partly due to lack of inventory much of the year.
  • 120 MW expansion of Itasca substation is expected by Mid 2018 with additional 120 MW in 2019/2020 will help spur several new developments in Suburban Chicago.
  • Strong leasing activity in Dallas came from tenants expanding not hyperscale users and overall concern that there is a limited numberof enterprises in the market.
  • Infomart looking to recapitalize portfolio in early 2018.
  • QTS purchased 84 acres in Phoenix, AZ for $25 MM and EdgeConneX purchased 55 acres in Mesa, AZ.
  • Santa Clara’s new inventory led to increased leasing led by Vantage at 13 MW after being hindered by lack of product.
  • Several new MTDC data centers announced in Atlanta but historically there has been less than 6 MW’s of leasing activity annually.
  • Blockchain and cryptocurrency requirements are driving new N solutions with less expensive power.
  • In Canada, U.S. hyperscale companies, and Bitcoin continue to absorb space in Quebec, limited leasing thus far in Toronto.
  • Significant multi-market leasing for latency sensitive requirements in MTDC led by YouTube Live. Others include Facebook Live, and POPS for hyperscale users.
  • Expect an uptick in demand to absorb space in MTDC by Internet of Things (IOT), Artificial Intelligence (AI), and large Chinese cloud providers (Alibaba, Ten Cent, Baidu and others).
  • Offshore capital made several investments in data center properties particularly in single tenant assets driving cap rates lower.
  • Apple’s $1.375 BN new data center in Iowa follows major projects by Microsoft and Facebook. Facebook also building $1 BN property in Virginia.

Historical Data center Inventory


Investment Activity 2017

Buyer Seller Size Market Sales Price Comments
Equinix Verizon Portfolio Various $3.6 BN 13.3x EBITDA
GI Partners Hines 290,000 sf Seattle, WA $276 MM 5.9% cap rate
QTS Health Care Serv. 260,000 sf Dallas, TX $50 MM BCBS – 1 MW
Central Colo & Legacy Meridian Group 200,000 sf Vienna, VA $96 MM Leidos & GSA leased
Carter Validus El Dorado Holdings 44,244 sf Tempe, AZ $16.4 MM T-Mobile 6.7% caprate
Carter Validus Spear Street Capital 153,000 sf Andover, MA $37 MM 7.3% cap rate
Digital Bridge Holdings 365 Data Centers Portfolio Cleveland &
Pittsburgh
Digital Bridge Holdings C7 Data Centers Portfolio Various $130 MM
Peak 10 Cbeyond Communications 33,000 sf Louisville, KY $5.4 MM
H5 Data Centers ByteGrid 333,215 sf Cleveland, OH $30.58 MM
CyrusOne Sentinel 11 MW
10 MW
Sentinel,NJ&Raleigh-
Durham,NC
$245 MM
$245 MM
14.4x EBITDA
Cologix Stonepeak Partners Portfolio Various $1.35 BN 17.7x EBITDA
Ascent Kimball Bridge Partners 5.5 MW Alpharetta, GA $30 MM
Digital Bridge Holdings Vantage Data Centers Portfolio Various $1.308 BN 17.0x EBITDA
Chirisa Investments 365 Data Centers 126,000 sf 8 properties
Zayo KO Networks 10,000 sf Various $12 MM 9.6x EBITDA
Green House Data Cirracore Various
Cyxtera CenturyLink Portfolio Various $2.8 BN 9-10.0x EBITDA
Carter Validus CyrusOne 75,000 sf Norwalk, CT $57 MM Cervalis 6.67% cap rate
Carter Validus IT Provider 60,000 sf Charlotte, NC $16.112 MM ATOS
Digital Realty Trust Private Investor 264,000 sf Franklin Park, IL $14.4 MM 2 year warehouse lease
Digital Realty Trust DuPont Fabros Portfolio Various $7.594 BN 21.2x EBITDA
Peak 10 ViaWest Portfolio Various $1.675 BN 16.4x EBITDA
DataBank Stream Realty 145,000 sf Dallas, TX
Carter Validus 250 Williams Street 995,728 sf Atlanta, GA $166 MM
Lincoln Rackhouse Coca Cola 88,000 sf Atlanta, GA $19 MM
Iron Mountain Fortrust 210,000 sf Denver, CO $128 MM 13.0x EBITDA
Carter Validus Westcore Properties 76,573 sf Sunnyvale, CA $36.8 MM Qwest 6.5% cap rate
Carter Validus CF Equipment Loans 58,000 sf Cincinnati, OH $10.3 MM GE 7% cap rate
Carter Validus Red Sea Group 49,800 sf Kingof Prussia,PA $19.2 MM Verizon 6.5% cap rate
Carter Validus Lexington Realty Trust 58,560 sf Tempe, AZ $15.2 MM Wipro 7.4% cap rate
CyrusOne 48 acres Quincy, WA
Zayo Stream Realty 29,500 sf Denver, CO $3.5 MM
1547 / CIM Group 400 Paul Avenue 7.3 acres San Francisco,CA
Digital Realty Trust Carter Validus 251,141 sf Northlake, IL $315 MM 7% cap rate
Mapletree Investments Carter Validus Portfolio Various $750 MM
Peak 10/ViaWest Glaxo Smith Kline 203,000 sf Philadelphia, PA
Global Securitization COPT 193,000 sf Chesterfield Cty,VA $44 MM 11% cap rate
Microsoft Chevron 202,000 sf San Antonio, TX $80 MM
1547 ICE 41,225 sf Markham, Ontario
Server Farm Realty AMD 151,588 sf Suwanee, GA
Iron Mountain IO Data Centers Portfolio Various $1.3 BN 15.6x EBITDA
Stream Realty Seefried Properties 107,000 sf Elk Grove Vlg., IL $18.86 MM Warehouse sold for $175/sf
Digital Realty Trust Centerpoint Properties 3.67 acres Chicago, IL $25 MM Adjacent to350ECermak
Carter Validus BP 103,200 sf Houston, TX $74.78 MM 6.8%caprate
GI Partners Ericsson 215,000 sf Montreal, Quebec

Big Red Wines We Really Enjoyed During 2017

  • ObisidianThe Slope Cabernet Sauvignon 2015 (N)
  • Charles Smith Substance Cabernet Sauvignon 2015 (N)
  • FreemarkAbbey Cabernet Sauvignon 2012 (N+1)
  • Shafer One Point Five Cabernet Sauvignon 2014 (N+1)
  • BoeschenEstate Cabernet Sauvignon (N+1)
  • NeyersAME Cabernet Sauvignon 2013 (N+1)
  • Joseph Phelps Bacchus Cabernet Sauvignon 2006 (2N)
  • Far NienteCabernet Sauvignon 2014 (2N)
Year End Northern Virginian Supply & Construction

Available Turn-key Data Center Space


Largest Wholesale Turn-Key Leases During 2017

Tenant Market Provider (MW)
Facebook Ashburn, VA DFT 22 MW
Microsoft San Antonio, TX CyrusOne 18 MW
Apple Ashburn, VA DFT 14.5 MW
Apple Chicago, IL DFT 14.5 MW
Microsoft Phoenix, AZ CyrusOne 12 MW
Google Ashburn, VA CyrusOne 10 MW
Facebook (renewal) Santa Clara, CA DLR 6 MW
Uber Phoenix, AZ Aligned 5 MW
Uber Ashburn, VA DLR 4.8 MW
Existing cust. Dallas, TX DLR 4 MW
Healthcare Dallas, TX DLR 4 MW
Softlayer Dallas, TX DLR 4 MW
NVIDIA Santa Clara, CA Vantage 3.5 MW
Tenant Market Provider (MW)
Zayo Los Angeles, CA GI Partners 2.5 MW
Two Sigma Chicago, IL CyrusOne 2.2 MW
PayPal Phoenix, AZ Aligned 2.1 MW
SunGard Boston, MA 109 Brookline 2 MW
Oracle Dallas, TX CyrusOne 2 MW
Oracle Dallas, TX DLR 2 MW
Cloud Firm Irving, TX QTS 2 MW
Vanguard Ashburn, VA CyrusOne 2 MW
Alibaba Ashburn, VA DLR 2 MW
Georgia Tech Atlanta, GA DataBank 2 MW
NVIDIA Santa Clara, CA Colovore 2 MW
Google Dallas, TX Infomart 2 MW
Apple Austin, TX Data Foundry 2 MW
SAP Ashburn, VA DLR 1.8 MW

25% increase in inventory of Multi Tenant Data Centers (MTDC) available or being built compared to last year. Click To Tweet


For the largest wholesale transactions, the numbers set forth represent what is believed to be the total commitment of the lease agreement. Under construction refers to white space being built. These numbers do not contemplate expansions. Information is from sources deemed reliable.


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