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Digital Realty's Singapore Sites to Enjoy SGIX Local Peering

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Data Center REIT — Digital Realty Trust, Inc. (DLR - Free Report) — recently announced a partnership with Singapore Internet Exchange (SGIX). The move is aimed at providing local peering at its Singapore data-center facilities in Jurong West and Loyang East.

In fact, one of the largest internet exchanges in Singapore, SGIX enjoys peak Internet traffic of more than 150 Gbps. It will provide customers at Digital Realty's Jurong West and Loyang East Singapore facilities better and cost-effective connectivity choices. The consumers will benefit from SGIX's rich peering ecosystem, consisting of international and regional carriers.

As a result, the partnership of Digital Realty with this open and neutral Internet exchange in Singapore seems a strategic fit. Particularly, Singapore serves as the Internet gateway to Asian markets. The region is fast growing and in fact, South East Asia is likely to upkeep 81 million people in its fast-growing cities by 2020.

Notably, growth in cloud computing, Internet of Things and big data, and an increasing number of companies opting for third-party IT infrastructure, is triggering demand for data centers. Demand is outpacing supply in the top-tier data center markets and despite enjoying high occupancy, these markets continue to randomly absorb new constructions at a faster pace. This, along with improved outlook for economic growth, is anticipated to drive demand for data centers.

To capitalize on the trend, Digital Realty has resorted to accretive acquisitions, developments as well as strategic partnerships. In September 2017, 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 blue-chip customer base. The company is also focused on expanding its footprint in Europe, Australia and Asia.

Nevertheless, given the solid growth potential of the data-center real estate market, competition is expected to intensify in the upcoming period from existing as well as new players. Amid all this, an aggressive pricing pressure is predicted in this market.

Digital Realty has a Zacks Rank #3 (Hold). The stock has lost 4.8% in the past three months against the 5.4% decline of the industry it belongs to.

Stocks Worth a Look

A few better-ranked stocks from the same industry are Arbor Realty Trust (ABR - Free Report) , Extra Space Storage Inc. (EXR - Free Report) and Sotherly Hotels Inc. (SOHO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share has been revised 2.3% upward to 90 cents over the past two months. Its share price has risen 2.7% in three months’ time.

Extra Space Storage’s FFO per share estimates for the current year inched up 1.1% to $4.56 in a month’s time. Its shares have gained 5.4% over the past three months.

Sotherly Hotels’ FFO per share estimates for 2018 have been revised approximately 1.9% upward to $1.05 over the past two months. The stock has climbed 10.9% during the past three months.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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