02/11/15 Five 9s Digital Research

2014 Data Center Real Estate Acquisitions Report – Year End Review

Year In Review

Data center real estate acquisition activity for the full year 2014 yielded at total of $1.148 Billion worth of transactions with 4,068,995 SF of data center real estate sold. This follows $1.292 Billion of transactions in 2013. The transactions represent eighteen (18) data center real estate assets sold with an average sale price of $63,812,500 per transaction.

The largest transaction by price was the $211.7M acquisition made by Carter Validus for the Ascent Data Center in the Chicago market. The largest transaction by size of data center was the 1.3 M SF carrier hotel data center located at 401 N. Broad in Philadelphia acquired by Netrality Properties.

Digital Realty Trust, historically having a large appetite for new acquisitions, acted as seller either outright or to a joint venture partner, as the company redirected its efforts in 2014. Carter Validus, a mission critical REIT, and other private investment firms filled this acquisitions gap generating comparable total annual sales volume as 2013. Other REITs not typically involved in the data center real estate market continue to look at the market for potential investments; However, REITs are being pressured to focus on core competency by shareholders so we do not see a big shift of new buyer competition from industrial, retail or other net leased REITs.

The data center real estate investment market remains very competitive for active buyer groups for strategically located assets with long term, good credit tenancy. Fairly aggressive lending at low interest rates continue to provide attractive financing opportunities for new data center acquisitions. Likewise, existing owners are refinancing assets at or near loan maturity taking some data center assets out of the potential investment pool. Cap rates have edged below 7% for good credit, long term, single-tenant leases. Investment opportunities lacking clear credit, shorter term leases and multi-tenant occupancy are typically trading in 7.5-9.0% cap rate range.

The data center real estate investment market continues to capture the macro trend of growth in data, storage, disaster recovery and the migration to the cloud. New developments, upon partial or full stabilization, and corporate sale-leasebacks will continue to supply the market for investors.

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