Digital Realty Trust, Inc. (DLR - Free Report) recently announced the launch of the Clonshaugh data center, the company’s latest facility in Dublin, Ireland. The move comes as part of the company’s effort to capitalize on the multibillion-euro technology boom that the city is set to experience in the coming years.
In fact, with growth in cloud computing, Internet of Things (IoT) and big data, and an increasing number of companies opting for third-party IT infrastructure, data-center REITs are likely to keep witnessing a boom market. Also, the estimated growth rates for the artificial intelligence, autonomous vehicle and virtual/augmented reality markets will remain robust over the next five to eight years. These factors are anticipated to give significant impetus for growth to data-center REITs, including Digital Realty, Equinix, Inc. (EQIX - Free Report) , CyrusOne Inc. (CONE - Free Report) and CoreSite Realty Corporation (COR - Free Report) .
Specifically, Digital Realty is poised to benefit from the solid data-center demand, as well as accretive acquisitions and development efforts. In fact, in Dublin, per the Digital Realty-commissioned study, " Digital Capitals Index: Dublin," four innovative technologies — Artificial Intelligence (AI), IoT, 5G and Blockchain — combined added approximately €1.23 billion to Dublin's economy in 2019. Specifically, IoT contributed the most at 51% of the total or €630 million.
Moreover, these new technologies are expected to contribute an estimated €6.37 billion to Dublin's economy in 2029, which represents a whopping increase of £5.14 billion from the 2019 level. Robust growth is likely to come from 5G, with its economic contribution rising to €1.12 billion from €30 million, over the next decade.
This is owing to 5G emerging as the foundation for deployment of several other innovative, data-led technologies. AI is expected to be the biggest driver with an estimated 46% surge in value, while IoT is projected to make contribution of a further 22%.
In fact, per the study commissioned by Digital Realty and conducted by Development Economics, out of the 60 digital cities studied, Dublin ranks 39th, though after adjusting for population size, this ranking puts the city in the eight place overall. By 2029, due to rapid growth of the technology sector in the city, Dublin’s ranking is expected to be up four places.
Amid these, Digital Realty’s investment in the Dublin data-center market comes as a strategic fit. In fact, the latest data center which marks a €70-million investment follows the company’s prior €200-million investment in the market, resulting in the opening of its Profile Park campus last May.
Nevertheless, Digital Realty faces intense competition in the industry. Amid this, aggressive pricing pressure will also likely persist in the upcoming period. Furthermore, the company has a substantial debt burden.
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