Digital Realty Trust, Inc. DLR recently unveiled its third data center in Toronto. The move further expands the company's presence in the fourth largest city in North America which is also the financial and business capital of Canada.
The latest 46-megawatt facility, situated on the former Toronto Star Printing Plant site at One Century Place in Vaughan, Ontario, enjoys proximity to downtown Toronto, major highways, and an international airport. With 23 computer rooms, this facility can house power capacities from one to three megawatts per room.
The expansion in Toronto is a strategic fit for Digital Realty as the capital city is home to several financial and technology companies, as well as emerging tech start-ups that are making significant strides in digital transformation, and require reliable provisioning of IT services and capabilities. Ranking among the top technology clusters in North America, Toronto has more than 15,000 technology companies along the Toronto-to-Waterloo corridor. Moreover, the city's diverse population is growing rapidly, thereby offering bright prospects for Digital Realty.
Data-center REITs are expected to continue experiencing a boom market with growth in cloud computing, Internet of Things and big data and an increasing number of companies opting for third-party IT infrastructure. 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. These factors, along with an improved outlook for economic growth, are anticipated to give significant impetus for growth to data-center REITs, including Digital Realty, Equinix, Inc. EQIX
, CyrusOne Inc. CONE
and CoreSite Realty Corporation COR
Specifically, Digital Realty is poised to benefit from the stellar demand for data centers, as well as accretive acquisitions and development efforts. In addition, the company's solid operating platform and healthy balance-sheet position enabled it to hike dividend in March.
However, the company faces intense competition in the industry. Amid this, aggressive pricing pressure is also likely to continue in the upcoming period. Furthermore, the company has a substantial debt burden and hence, rate hike adds to its woes.
Currently, Digital Realty 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 inched up 0.2% over the past three months compared with the industry
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Equinix, Inc. (EQIX): Free Stock Analysis Report Digital Realty Trust, Inc. (DLR): Free Stock Analysis Report CoreSite Realty Corporation (COR): Free Stock Analysis Report CyrusOne Inc (CONE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research