Digital Realty Trust Inc. (DLR - Free Report) , a data center real estate investment trust (REIT), is making efforts to expand its core business in the Asian markets on the back of strategic acquisitions and partnerships.
The company pointed at the current fragmented market conditions to justify this move. Management anticipates that future market consolidation will bring efficiencies of scale and enable the company to capitalize on cost effectiveness.
After fortifying its position in the U.S markets, the company intends to strengthen its base in the Asian markets of Singapore, Hong Kong, Japan, as well as in Australia. Although it is the least developed of all other markets, there is growth in demand for data centers in Asia. This will favor Digital Realty’s plans to make strategic in-fill acquisitions and attain organic growth.
The company is considering various factors like quality of assets, appropriate locations and possibility of building client relationships, while assessing prospective acquisitions. This will enable it to efficiently meet the elevating demand in targeted markets and widen its customer base.
Further, Digital Realty’s investment grade balance sheet and strong liquidity position will aid in pursuing these buyouts. The company enjoys a diversified source of capital and has a well-laddered debt maturity schedule, with nominal near-term maturities.
Digital Realty set foot in Singapore with the Jurong East data center. Since then it has been expanding its global footprint, operating a network of data centers around Singapore, Hong Kong, Osaka, Melbourne and Sydney.
The company recently commenced the construction of a new data center development in Western Sydney, expanding its presence in Australia. 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.
With growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure, data center REITs are experiencing a boom market. Amid these, the company’s focus on Asian markets is likely to drive top-line growth.
However, Digital Realty faces stiff competition from other industry players like CyrusOne Inc. (CONE - Free Report) , CoreSite Realty Corporation (COR - Free Report) and Equinix, Inc. (EQIX - Free Report) . In fact, the company competes with several data center developers, owners and operators, many of which enjoy ownership of similar assets in locations same as Digital Realty. Given the solid growth potential of the data center real estate market, competition is expected to increase in the upcoming period from existing players, as well as entry of new players.
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