After a few modest years of activity following the economic crash, data center real estate market activity has reawakened and is making up for lost time.
In 2012, there were murmurs and signs that things were beginning to turn around, but the results proved full of what most anticipated; hesitation and caution on the part of operators and investors. Towards the end of 2012, however, we began to see the long awaited transition from market optimism to action.
Earlier this year, we published our year in review, 2012 Data Center Real Estate Acquisitions Report, which reported on data center real estate transactions that occurred throughout the year. As it pertains to this analysis, there are a number of important elements to inspect. For the year, the market witnessed roughly 4.5 million SF of deals valued at $2 Billion. For further perspective, if we remove Digital Realty Trust’s $1.1 Billion acquisition of the Sentrum Portfolio in the greater London area, those figures become a more modest 3.7 million SF worth roughly $900 Million.
In the fourth quarter alone, there was 1.7 million SF of data center real estate acquisitions, making up roughly 38% of the square footage of the entire year. Again, if we remove the outlying Sentrum Portfolio deal, that percentage climbs to 46% of the year’s totals.
Since then, the proverbial seal has been broken, and deals have begun transacting on a regular basis, putting the recent economic downturn in the rearview mirror.
Fast Start to 2013
The momentum built up by the end of 2012 carried over into 2013 and exceeded the fourth quarter numbers. According to our Q1 2013 Data Center Real Estate Acquisitions Report, approximately 2.7 million SF of deals transacted in the data center marketplace worth just over $350 Million. At this pace, the 2012 numbers may be surpassed by the end of the Q2, and 2013’s totals would more than double the mark set by 2012.
Crystal Ball for 2013
While it is unreasonable to put too fine a point on the expectations of 2013 by making bold projections based solely on the productivity of the first quarter, the numbers over the past six months (4.4 million SF of deals worth over $700 Million) help point towards a noticeable improvement in market activity.
What can we expect for the rest of 2013? Only time will tell for certain, but things are unquestionably trending up, and if the rumored deals in the works are of any indication, the data center real estate acquisition totals for 2013 will far surpass those from 2012.
Information and analysis contained in this report are based upon a sampling of data center real estate acquisition activity over the course of 2012 and the first quarter of 2013. Information contained in the mentioned reports used for any purposes other than a general representation of data center market activity shall need to be verified.