2019 Real Estate Forecast

Posted on Jan 10, 2019

Read our report that recaps 2018 market activity and highlights the trends that will shape data center real estate in 2019.

Download the 2019 Report (PDF) »


Overview of Issues Impacting Data Centers During 2018

  • Multi-Tenant Data Center (MTDC) leasing more than doubled in 2018 compared to 2017.
  • Leasing activity in Northern Virginia (NOVA) for data centers was more than two and a half times all other markets combined in 2018.
  • Overall rental rates have decreased as a result of new operators and investors and hyperscale users demanding volume pricing.
  • These massive cloud users once again dominated leasing activity in 2018.
  • Overall volume and value of investment activity were down from 2017, but several highly anticipated strategic transactions will set the course for a couple of larger operators.
  • Given the proliferation of new capital and an increase in stabilized assets, developers will use joint ventures to fund their expansions.
  • Significant increase in land acquisition to bank for future development dominated by NOVA.
  • Land sales are nearing $2.0 million an acre in Ashburn, and as such, Prince William County and Fauquier County have seen an uptick in land sales topping off at $425,000 and $250,000, respectively.
  • Large enterprises sold data center properties as sale-leasebacks or vacant assets.
  • Cap rate compression led to additional sales on recently traded long-term stabilized assets.
  • The roll out of turnkey leases in 2008-2009, coupled with a proliferation of shorter-term leases signed in 2013-2014 has led to significant increase in leases expiring in 2019 and 2020.
  • Dallas leased over 40 MW of space mostly through expansions.
  • Chicago leased more than 20 MW of space in 2018, mostly to smaller tenants.
  • New speculative space in Santa Clara met with strong leasing activity, particularly by Chinese technology companies.
  • Leasing activity in Atlanta has been limited, and developers have been slow to build despite numerous new projects announced in 2017.
  • Tenants expanding and new large campus developments contributed to robust leasing in Salt Lake City and Phoenix in 2018.
  • Leasing activity in Quebec was dominated by cryptocurrency and Amazon leased 6 MW at two locations.
  • DLR had some recent success with U.S. cloud operators in Toronto.
  • Acceleration of blockchain throughout the U.S. and Canada in 2018 met with pushback on utility pricing.
  • Significant challenges have emerged thus far for landlords and tenants reaching terms for blockchain.
  • New projects by operators expected in several markets during 2019 will face challenges related to timing due to supply chain constraints.
  • A significant uptick in construction costs are expected as a result of a decrease in the supply chain brought on by hyperscale data center users.
  • Costs will be exacerbated by steel and aluminum tariffs and electronic components from China.
  • Shortages of labor in NOVA, the Bay Area, and Washington will delay the delivery of some data center operator projects.

Historical Data Center Inventory-2019


Investment Activity 2018

Buyer Seller Size SF Market Sales Price Comments
INAP Singlehop Chicago, IL $132 MM 7x EBITDA
Landmark Infrastructure Lexington Realty Trust 84,000 Omaha, NE $16.4 MM Wipro – 7.1% cap rate
GI Partners RXR Realty 130,009 Nutley, NJ $42.9 MM BT Americas
Iron Mountain IO Data Centers, LLC 530,856 Phoenix, AZ $106.875 MM 9 acres & 60 MW Adj
Iron Mountain IO Data Centers, LLC 125,000 Scottsdale, AZ $35.625 MM
Carter Validus Digital Realty 69,048 Rancho Cordova, CA $36.8 MM SunGard – 8.97% cap
Carter Validus Digital Realty 63,791 Rancho Cordova, CA $14.2 MM Windstream – 8.45% cap
Carter Validus 62,002 McLean, VA
CIM Group LP / 1547 Green House Data 42,000 Cheyenne, WY
eStruxture Duke Realty 446,811 Sterling, VA $109.9 MM United – 5.25% cap rate
Equinix ASB / DCI 1.6 MM Dallas, TX $800 MM 33-35x EBITDA
IPI Partners T5 Data Centers Kings Mountain, NC Boeing
Landmark Infrastructure Carter Validus 59,516 Hartland, WI $21 MM 8.4 % cap rate
Alpharetta DC, LLC Carter Validus 165,000 Alpharetta, GA $62.2 MM E-trade – 6.79% cap rate
Carter Validus KSB Real Estate Trust 76,410 San Jose, CA $49.15 MM AT&T 7yr lease
Brookfield Infrastructure AT&T Portfolio Various $1.1 BN 9-10x EBITDA
Landmark Infrastructure Cyxtera 57,000 Lewis Center, OH $5.71 MM Cyxtera – 6.74% cap rate
Research Way Investments Bluegrass Partners Bank 376,000 Lexington, KY $15.9 MM Valvoline – court sale
Lincoln Rackhouse/Principal Bank of America 259,111 Kansas City, MO $26 MM Vacant
Lincoln Rackhouse/Principal Bank of America 191,061 Chandler, AZ $39.7 MM INAP – 4.5% cap rate
Lincoln Rackhouse Principal Bank of America 454,421 Plano, TX $81.35 MM Partial sale/leaseback
DI Assetco LLC (Landmark) RS, Almeda, LLC 27,000 Santa Clara, CA $37 MM
Ensono Wipro Portfolio Various $405 MM
H5 Data Centers Intuit, Inc. 240,000 Quincy, WA $41 MM Partial sale/leaseback
Landmark Infrastructure 75,119 Richardson, TX $36.6 MM SunGard – 7.8% cap rate
Pinchal Skybox 150,000 Plano, TX $48 MM Blockchain
Menlo Equities Carter Validus 92,700 Andover, MA $15 MM Windstream – 6.64% cap
Landmark Infrastructure Louis J. Eyde Family 132,456 Hazelwood, MO $50 MM Reuters – 6.6% cap rate
EdgeConnex Merit Partners, Inc. 79,183 Tempe, AZ $15.63 MM 6.5% cap rate
IPI Partners T5 Data Centers 221,336 Elk Grove Village, IL $118.9 MM
IPI Data Centers ASB Real Estate Portfolio Various TBD
Carter Validus Douglas Draper, TTEE 25,321 St. Louis, MO $3.2 MM Verizon – 7.79% cap rate
Affiliate of Next Tier HD Stream Data Centers 75,676 Chaska, MN $77.5 MM US Bank – 6.8% cap rate
IPI Data Centers ASB Real Estate Portfolio Various TBD
Raymar Land State Automobile Mutual 25,589 Columbus, OH $4.45 MM Vacant
Rock Creek DC II 4726 29,960 Canton, OH $9.4 MM 100% – 8.2% cap rate
IPI Partners Clarion Partners 88,470 Tukwila, WA $53.5 MM Century Link
Carter Validus 21,800 Hartford, CT $5.2 MM Verizon
CIM Group LP / 1547 Digital Capital 66,000 Chicago, IL $27 MM
Vantage 4 Degrees Portfolio Various $200 MM

Big Red Wines We Really Enjoyed During 2018

  • Amici To Kalon Cabernet Sauvignon 2015 (2N)
  • Behrens Clearing the Way 2013 (N+1)
  • Chateau Smith Cabernet Sauvignon 2015 (N)
  • Revana Cabernet Sauvignon 2014 (N+1)
  • Orin Swift 8 Years in the Desert Red Wine 2016 (N+1)
  • Melanson Matthew’s Block Cabernet Sauvignon 2012 (N+1)
  • Clif Family Cold Springs Cabernet Sauvignon 2015 (N+1)
  • Fantesca All Great Things Red Wine 2015 (2N)

Available Turn-key Data Center Space


Largest Wholesale Turn-Key Leases During 2018

Tenant Market Provider (MW)
Facebook Manassas, VA Cloud HQ 72 MW
Salesforce Manassas, VA QTS 26 MW
Microsoft Manassas, VA Cloud HQ 25 MW
Facebook Ashburn, VA DLR 25 MW
Microsoft Ashburn, VA CONE 20 MW
TBD Ashburn, VA DLR 20 MW
Streamcast Las Vegas, NV Switch 15 MW
HUG (PBB) Houston, TX Skybox 15 MW
Microsoft Ashburn, VA RagingWire 14 MW
INAP (BoA) Chandler, AZ Lincoln 10 MW
Microsoft Toronto, CA DLR 10 MW
Microsoft Ashburn, VA CONE 10 MW
Salesforce Ashburn, VA CONE 6 MW
Salesforce Ashburn, VA DLR 6 MW
China Telecom Santa Clara, CA DLR 6 MW
Microsoft San Antonio, TX CONE 6 MW
Alibaba Ashburn, VA CONE 5 MW
Microsoft Ashburn, VA DLR 5 MW
Tenant Market Provider (MW)
SAP Ashburn, VA DLR 5 MW
Microsoft Phoenix, AZ CONE 5 MW
Google Salt Lake City, UT Aligned 5 MW
Nokia Suburban Chicago, IL DLR 3.3 MW
Alibaba Ashburn, VA CONE 3 MW
Oracle Toronto, CA DLR 3 MW
TBD Denver, CO Flexential 2.5 MW
Google Chicago, IL EQIX 2.4 MW
Google Chicago, IL QTS 2 MW
Oracle Dallas, TX QTS 2 MW
TBD Hillsboro, OR Infomart 2 MW
Blockchain Montreal, CA Estruxture 2 MW
PayPal Salt Lake City, UT Aligned 2 MW
Criteo Dallas, TX Aligned 2 MW
Nutanix Phoenix, AZ Aligned 2 MW
Jack Henry Allen, TX Compass 2 MW
PayPal Phoenix, AZ Aligned 2 MW
Salesforce Phoenix, AZ CONE 2 MW
Workday Portland, OR Flexential 2 MW
Delta Atlanta, GA T5 2 MW

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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