Digital Realty Trust’s ( DLR Quick Quote DLR - Free Report) recent portfolio-fortification efforts on the back of expansions and the enhancement of data-center connectivity will aid the company to capitalize on growing data-center demand. Yet, amid the competitive landscape, aggressive pricing pressure is likely to prevail in the upcoming period.
Markedly, technological advancements such as The Internet of Things, 5G, autonomous vehicles and artificial intelligence are driving digital transformation. Moreover, escalating growth of data, rapid accelerations in cloud adoption and greater demand for IT outsourcing have propelled the demand for data-center infrastructure.
Hence, as infrastructure providers for this rapidly-growing digital economy, data-center providers such as Digital Realty,
Equinix, Inc. ( EQIX Quick Quote EQIX - Free Report) , CyrusOne Inc. ( CONE Quick Quote CONE - Free Report) and CoreSite Realty Corporation ( COR Quick Quote COR - Free Report) are well-placed for sustainable growth.
As for Digital Realty, the company is capitalizing on such tailwinds by developing and acquiring data centers globally. In fact, recently, it unveiled its largest data center in Singapore. The facility, known as Digital Loyang II or SIN12, is its third facility in Singapore.
Also, in March, Digital Realty announced new on-ramps in Atlanta, Los Angeles, Düsseldorf, Frankfurt and Vienna to expand the safe and private access to Google Cloud's global network. The new direct connections will provide high-speed and low-latency connections on Digital Realty's locations in Atlanta, Los Angeles, Vienna in Austria and Düsseldorf in Germany. Such efforts will enable it to ride on its growth curve.
The data-center operator has a high-quality diversified customer base, comprising tenants from cloud, content, information technology, network, other enterprises, and financial industries. The majority of its tenants are investment-grade rated and numerous customers use multiple locations across the portfolio. This provides the company with cash-flow stability.
Digital Realty currently carries a Zacks Rank #3 (Hold). Shares of the company have inched up 0.4% over the past year compared with the
industry’s rally of 18.3%.
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Given the solid prospects of the data-center real estate space, developers have taken notice of the asset class’s potential. Hence, competition is expected to increase in the upcoming period from existing players as well as the entry of new players. Amid this, there is aggressive pricing pressure in the data-center market, curbing Digital Realty’s growth.
Also, the company has a significant number of properties situated outside the United States. It is also considering making additional international acquisitions. Although a sound global footprint helps the company to meet the rising data center requirements of customers around the world, the process exposes its earnings to foreign currency translation.
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