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Digital Realty Eyes Expansion in Australia, Opens 5th Facility


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In an effort to expand its presence in Australia, data-center REIT Digital Realty Trust, Inc.DLR recently announced the opening of Digital Erskine Park II, the company's fifth data center in the nation. The company also announced the purchase of an additional 1.4-hectare land parcel to build out the next phase of the Erskine Park connected campus, adding 12 megawatts of capacity.

In fact, the latest expansion efforts in Sydney bring the company's total investment in Australia to more than AUD $1 billion and raise its data-center footprint in the nation to six facilities. This is a notable step because the nation serves as a crucial market for not only the company's Asia-Pacific business, but also its global operations as well. Moreover, there is a solid demand for data and technology infrastructure amid fast growth of inbound business and regional digital economy.

Per the company, the cloud-enabled facility comprises 7,000 square meters of space and will offer up to 17.4 megawatts of critical IT power capacity which will help several Australian and international customers. Additionally, the new facility will have connectivity through dark fibre to the existing facilities on the Digital Realty Erskine Park connected campus, thereby, enabling assembling of critical data center, network, cloud and connectivity providers under a single, secure environment for its customers.

Notably, 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. 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. 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 improved outlook for economic growth, will significantly propel growth of data-center REITs, such as Digital Realty, Equinix, Inc. EQIX , CyrusOne Inc. CONE , CoreSite Realty Corp. COR and others.

Amid these, accretive acquisitions and development efforts are anticipated to boost top-line growth for Digital Realty. Last year, the company announced the completion of a merger with DuPont Fabros in an all-stock deal for an enterprise value of about $7.8 billion. This move enhanced Digital Realty's portfolio in the top U.S. data-center metro areas across Northern Virginia, Chicago and Silicon Valley. It helped it upgrade hyper-scale product offering and grow the company's blue-chip customer base. The company is also focused on expanding its footprint in Europe, Australia and Asia.

Particularly, Digital Realty remains well poised to meet the demands of its widening customer base in Australia on the back of the company's expansion initiatives. In fact, the company enjoys ownership and operation of 198 properties across 32 global metropolitan areas. Specifically, the company has a significant presence in the Asia-Pacific region, operating a network of 12 data centers situated in Singapore, Hong Kong, Tokyo, Osaka, Melbourne and Sydney.

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, an aggressive pricing pressure is anticipated as well in the data-center market.

Digital Realty currently has a Zacks Rank #3 (Hold). However, shares of the company have slightly underperformed the industry it belongs to, in the past month. The stock has gained 1.5%, while the industry has rallied 3.9%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .



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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: EQIX , DLR , CONE , COR



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