2021 Real Estate Forecast

Posted on Jan 18, 2021

Data Center Real Estate Review 2020

Read our report that recaps 2020 market activity and highlights the trends that will shape data center real estate in 2021.

Download the 2021 Report (PDF) »

Overview of Issues Impacting Data Centers During 2020

  • Overall, Multi-Tenant Data Center (MTDC) leasing activity in the US in 2020 was just under 700 MW was more than three times greater than that in 2019 and twice that of 2018, which means it was the best all-time year for MTDC leasing.
  • Several of these transactions involved the expansions of hyperscale tenants in the same location.
  • Northern Virginia (NOVA) led the charge, leasing more than 500 MW which doubled 2018 and was 80% of the total for US & Canada.
  • The low rental rates resulting from the significant inventory at the beginning of the year in NOVA increased (for the smaller tenants) during the third and fourth quarters.
  • Microsoft dominated the leasing on a national basis, supplemented by Bytedance (Tik Tok) and Facebook in Northern Virginia, and Cloud HQ, Aligned, and Digital Realty Trust were the beneficiaries of this leasing
  • The strong leasing activity during the second quarter stemmed from hyperscale companies, as many of these tenants pulled forward their requirements as a result of the distributed work-force and the work-from-home lifestyle.
  • In addition to remote work, online gaming, social media, video streaming, and ecommerce all drove leasing activity during the pandemic.
  • An uptick occurred in enterprise, and hyperscale users focused on their carbon footprints. Data center operators matched this by increasing their use of renewable energy.
  • Tenants increasingly are finding landlords more receptive to porting some of their load once again giving operators with multiple footprints advantage to the one offs.
  • Under construction numbers for the first time surpass space available as noted in graph, mostly driven by Northern Virginia as NOVA supply was significantly higher last year.
  • Several of the third-party data center operators reported the repatriation of enterprise users from the cloud.
  • Much of the enterprise’s leasing took place in the first quarter, before the pandemic slowed down its leasing. Expect the leasing activity for those users to pick up during 2021, after we overcome the logistics of acquiring new sites.
  • Chicago had its strongest year during the past three years with more than 45 MWs leased by Microsoft and in 2021 they will have more than 400,000 square feet under construction in the suburbs. Downtown also had strong leasing, led by QTS. Furthermore, Skybox and Stream have acquired properties to expand.
  • Other notable markets in 2020 was the Bay Area led by Microsoft and Atlanta had success that benefitted primarily QTS. Activity in Phoenix was driven by Oracle and Microsoft.
  • Dallas continues to struggle landing hyperscale coupled in 2020 with lack of enterprise leasing.
  • Overall one-off investment activity slowed down due to the pandemic. However, a significant increase in volume occurred.
  • During 2020, several mergers with fiber and data centers as well as acquisitions with low cap. rates have once again reemphasized the importance of connectivity.
  • A significant increase in capital from insurance companies, pension funds, sovereign funds, and traditional real estate investors, coupled with the reallocation of capital from other real sectors, will lead to a dramatic decrease in the cap. rates in 2021. The strategies are as diverse as the investors them-selves, and, in general, they have not created a surplus.
  • 14 data center properties have been traded twice during the past 4 years. The average hold time was 2.7 years, and the average nominal return was 89%.
  • There has been an increase in investors becoming comfortable with shorter-term leases; most of the publicly traded companies report a 7.25-year average term length.
  • Merger and acquisition activity should remain strong in 2021 due to the aforementioned, as well as private equity firms exiting their mature investments.

Historical Data Center Inventory 2021

Investment Activity 2020

Buyer Seller Date Size SF Market Sales Price Comments
Colony Capital  Databank  1/20    various  $185 MM  17.5 X EBITDA 
MapleTree  Digital Realty  1/20  381,387  Aurora, CO  $97.42 MM  Flexential leases 171,289 sf 6.63% Cap. Rate 
Landmark Dividend  Paypal  2/20  134,856  Phoenix, AZ  $122 MM  Partial Sale/Leaseback – 7% Cap. rate 
Digital Realty  Clise Properties  2/20  400,000  Seattle, WA  $305 MM  5.7 % Cap. Rate, Exp. Ownership from 49% 
Landmark Dividend Individual 4/20  61,080  Louisville, KY  $7.35MM  Flexential leased 
Harvest Properties  CIM Group  4/20  105,800  San Francisco, CA  $99MM  Carrier Hotel SOMA(95% leased) 
Alliance Consolidated  MVTC, LLC  6/20  35,908  Marietta, GA  $5.95 MM  Sagenet 100% -15yr. 7.5% cap. rate 
Liberty Mutual  Microsoft  6/20  72,593  Redmond, WA  $15.3 MM  Partial short term sale/leaseback 
Equinix  Bell Canada  6/20  1,600,000  Various  $780 MM  25 properties – 15X EBITDA 
Landmark Dividend  C.H. Robinson  7/20  32,000  Oronoco, MN  $5.5 MN  CH Robinson sale/leaseback – 5yr 
Colony Capital  Vantage  7/20  1,400,000  Various  $3.5 BN  Recapitalization @ 20 x EBITDA
SBA- Edge  MetroLofts LTD  7/20  277,334  Jacksonville, FL  $24.9 MM  JaXNap 
Rhino Capital LLC  Conguity 360  7/20  199,902  Fall River, MA  $15.45 MM  Sale/leaseback – 10 year lease 
Edgeconnex  EQT  8/20    Various  $3.4 BN  40 properties @ 24 x EBITDA 
Landmark Infrastructure  Hillcorp  9/20  138,000  Lansing, MI  $52.5 MM  3 property NNN LiquidWeb 
Landmark Infrastructure  Sungard  9/20  82,617  Mississauga, ON  $28.83 MM  Sale/leaseback 
Landmark Infrastructure  Sungard  9/20  134,574  Smynra, GA    Sale/leaseback 
Databank  zColo  9/20  1,100,000  Various  $1.4 BN  44 properties – 14x EBITDA 
Stonecourt Capital  CHIRISA  10/20  230,000  Various  12 properties 22MW 
T5 Data Centers  Apple  10/20  128,566  Newark, CA  $60 MM  Former facebook – 17MW 
Harrison St/1547  Ascendant  10/20  132,000  Milwaukee, WI  $7.25 MM  15 story carrier hotel 
Landmark Infrastructure  Altus Group  10/20  88,000  Champaign, IL  $13.4 MM  Amdocs leased 
Blackstone  COPT/GI 11/20  1,300,000  Ashburn, VA  $293 MM  (6) NNN Powered Base Shells 
Harrison St / 1547 Alco Investment 12/20  302,262  Portland, OR  $326 MM  Carrier Hotel 

Capitalization rates and EBITDA multiples are provided from sources deemed reliable.

Big Red Wines We Really Enjoyed During 2020

  • Obsidian Ridge Sonoma Cabernet Sauvignon 2017 (N)
  • Stag’s Leap Napa Fay Vyd. Cabernet Sauvignon 2017 (2N)
  • Orrin Swift California Funeral Pyre Red Wine 2015 (2N)
  • Pahlmeyer Napa Merlot, 2016 (N+1)
  • Cliff Lede Napa High Fidelity Red Blend 2016 (N+1)
  • Mount Peak Sonoma/Napa Sentinel Cabernet Sauvignon 2015(N+1)

Largest Wholesale Turn-Key Leases During 2020

Tenant Market Provider (MW)
Microsoft(PBB)  Franklin Park, IL  DLR  192,000(SF)
Bloomberg(PBB)  Totowa, NJ  DLR  150,000(SF)
Facebook  Ashburn, VA  CloudHQ  72 
Google  Ashburn, VA  CloudHQ  60 
Microsoft  Manassas, VA  CloudHQ  60 
Bytedance  Ashburn, VA  Aligned  54 
Bytedance  Ashburn, VA  DLR  52 
Microsoft  Ashburn, VA  DLR  40 
Microsoft  San Jose, CA  Stack  32 
Microsoft  Sterling , VA  CONE  24 
Microsoft  Ashburn, VA  NTT  22 
Bytedance  Ashburn, VA  DLR  20 
Microsoft  Elk Grove Village, IL  Stack  18 
Microsoft  Elk Grove Village, IL  Stream  15 
Workday  Ashburn, VA  Sabey  12 
Twitter  Atlanta, GA  QTS  12 
Twitter  Hillsboro, OR  DLR  12 
Oracle  Sterling, VA  QTS  10 
UBER  Sterling, VA  QTS  10 
Rackspace  Manassas, VA  IRM 
Bytedance  Sterling , VA  Vantage 
Uber  Atlanta, GA  QTS 
Microsoft  Phoenix, AZ  IRM 
Oracle  Phoenix, AZ  IRM 
Microsoft  Franklin Park, IL  DLR 
Oracle  Phoenix, AZ  DLR 
Oracle  Phoenix, AZ  CTL 
Oracle  Sterling , VA  Vantage 
Tenant Market Provider (MW)
LinkedIn  Hillsboro, OR  Stack 
Uber  Ashburn, VA  QTS 
Systems Integrator  Ashburn, VA  QTS 
Oracle  Ashburn, VA  NTT 
Oracle  Ashburn, VA  DLR 
Citadel  Somerset, NJ  CONE 
FedEX  Atlanta, GA  SWCH 
Workday  Atlanta, GA  QTS  4.5 
Citadel  Chicago, IL  QTS  4.5 
Expanding customer  Santa Clara, CA  Vantage 
US Patent & Trademark  Manassas, VA  IRM 
Facebook  Richmond, VA  QTS  3.5 
Government Contractor  Manassas, VA  OFC  3.5 
LinkedIn  Sterling, VA  STACK 
AWS  Manassas, VA  IRM 
Linkedin  Dallas,TX  DLR 
Ebay  Reno, NV  SWCH 
TBD  NYC  Sabey 
Facebook  Chicago  QTS 
Playstation  Chicago  QTS 
IBM  Ashburn, VA  NTT 
Ebay  Las Vegas, NV  SWCH 
Deutsche Bank  Clifton, NJ  DLR 
IBM  Ashburn, VA  DLR 
Microsoft  Santa Clara, CA  COR 
Google  Los Angeles, CA  COR 
Wells Fargo  Chaska, MN  Flexential 

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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