Digital Realty Trust to Spend Half a Billion on Datacenters

Digital Realty Trust is the leading provider of real estate space to the data center industry.  As of today they have a market cap of over $5 billion and 14 million rentable square feet of space.

I’m very interested in the data center industry as I think it reflects one of the ways that the world is currently changing that will heavily impact real estate.  Digital Realty is currently constructing a little over a million square feet of new space at a cost of over $500 million.  That makes sense give that they currently have about 95% occupancy in their existing buildings.

Let’s think about the ways that the world is currently changing. 

Movie rental stores appear to be a thing of the past.  In the near future movies will be rented from Redboxes and Netflix.  In the slightly more distant future they will be streamed.  Streaming will require that they are stored online, and that will require data centers.  Similarly, music stores are already obsolete (unless you have an ironic moustache and a fixed gear bicycle, in which case you no doubt know of a music store that beats the experience of getting your music online).  For now you might get music from Apple, or by stealing it.  In the future (or now if you choose) you will stream your music.  That will require online storage.  Online storage = data centers.  Books are moving online.  The web is exploding in content (this very post is a small piece of that explosion).  The pictures of your family vacation posted to Facebook require storage.  Your small business data will be hosted online, in the cloud, and it will be cheaper than having an IT guy come to your office once a month to maintain your server.  Education will be dominated by online video, which will require storage.

I have some plans to tie this post back to some of the points I’ve been making about the future of retailing.  More to come this week.

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