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Digital Realty Completes AZ Expansion

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Digital Realty Trust Inc. (DLR - Free Report) , a niche real estate investment trust (REIT), has recently completed the expansion of its existing data center facility in Chandler, Arizona, spanning 293,000 square feet of space.

With the expansion of the facility, which began in the first quarter of 2011, the company has added approximately 226,000 rentable square feet of data center space and 13 megawatts of additional power to meet the increased customer demand in the Phoenix market.

Phoenix has historically been a strong data center market driven by healthy demand from local Arizona-based companies. In addition, blue-chip technology companies based elsewhere in the U.S. also view it as an ideal location for both primary and backup datacenters. Furthermore, Phoenix has traditionally harbored a pro-business environment along with low cost of power.

However, with the supply of new data center space remaining muted in recent years, a supply-demand imbalance was created in the market. Consequently, the expansion of the facility in Chandler is expected to bring on board a significant volume of high-quality datacenter space to meet the increased demand and provide critical infrastructure to support the economic growth in the region.

Digital Realty operates datacenters and digital storage facilities, which are primarily used by telecommunication companies to maintain their internet presence or augment their data networks. Datacenters usually incur high costs for building and maintenance, and as such supply is relatively inelastic.

Digital Realty provides flexible and cost effective datacenter facilities to a wide range of customers, including domestic and international companies across multiple industry verticals. Its portfolio includes 97 properties throughout Europe and North America spanning approximately 17.2 million square feet of space (including 2.2 million square feet of redevelopment space).

With demand for digital storage facilities increasing in recent years, Digital Realty has benefited greatly by negotiating favorable lease terms and maintaining strong occupancy rates. The long-term lease agreements have also insulated the company from short-term volatility and unfavorable market swings experienced during the recession. This has enabled Digital Realty to continue to pay out solid dividends to its shareholders.

The rating on Digital Realty is currently Neutral. MPG Office Trust Inc. , one of the peers of Digital Realty, also has a Neutral recommendation for the long-term.

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