Data Center Real Estate Acquistions Exceed $3B in 2018

Data center real estate acquisition activity for the full year of 2018 yielded approximately $3.089 Billion of data center real estate transactions totaling 8,055,356 SF. In comparison, full year 2017 total activity was $2.742 Billion and 7,496,075 SF of total space.

Pricing

Interest rates peaked to the highest level over the past 5 years and continued the trend of ending the year at a higher level when compared to the beginning of 2018. Although we have seen gradual cap rate compression in the data center real estate sector over the past several years, we anticipate cap rates to be relatively flat for 2019. For good quality data center assets with long term leases, we expect a 6.5%-7.25% cap rate range pending overall lease dynamics, asset quality and market fundamentals. Data center assets with shorter term leases, multi-tenant occupancy and lack of clear tenant credit are estimated to trade in 7.25%-8.5% cap rate range with various factors that may affect the swing outside of these parameters.

M&A

While the number of significant data center M&A deals climbed to 68 in 2018, approaching an aggregate value of $16 billion, the total value of deals dropped when compared to 2017. While there were 5 deals that each were greater than $1 billion in 2018, none came close to the Digital Realty and DuPont Fabros or Equinix and Verizon deals in 2017. The largest M&A deal in 2018 was a group of Asian investors purchasing a 25% stake in Global Switch valued at $2.8B.

For the full report, please visit: 2018 EOY Data Center Real Estate Report