Digital Realty-Mitsubishi JV To Buy Additional Land In Tokyo

Data-center REIT Digital Realty Trust, Inc. (NYSE:DLR) recently announced that the company’s 50/50 joint venture (JV) with Mitsubishi Corporation — MC Digital Realty — has inked a deal in a bid to expand its presence in Japan. Per the deal, the company will acquire an additional land plot in Tokyo to develop a 120-megawatt connected campus for global and regional customers.

The acquisition of the land plot, which is strategically located in Greater Tokyo's Inzai data center cluster, close to the five-acre parcel MC Digital Realty purchased earlier this year, is likely to conclude in the first quarter of 2020. The two land parcels will be combined to construct the connected campus.

Per the Tokyo Connected Campus @ Inzai development roadmap and subject to customer demand, the first building to be developed on new site will be a 36-megawatt facility (NRT11). It will be followed by a 30-megawatt facility (NRT12) and an 18-megawatt facility (NRT13).

The acquisition of the land plot and combination with the earlier-acquired land will boost Digital Realty’s position in the Inzai data-center cluster. It is one of the densest areas in Japan, with presence of leading global cloud providers and financial institutions. Moreover, there is a well-established utility and connectivity infrastructure.

In fact, Tokyo has emerged as one of the top financial and technology centers in the Asia-Pacific region. Additionally, with public cloud growth and rising demand for data-center solutions, this data-center market is likely to witness quick expansion in the upcoming years. Digital Realty too is focused on leveraging on growth potential of the Asia-Pacific region, and operates a network of data centers situated in Singapore, Hong Kong, Osaka, Tokyo, Melbourne and Sydney, at present.

With growing popularity of cloud computing, Internet of Things and big data, as well as the use of third-party IT infrastructure by several companies, data-center REITs have been witnessing a boom. Additionally, 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. This will significantly propel growth of data-center REITs, such as Digital Realty, Equinix, Inc. (NASDAQ:EQIX) , CyrusOne Inc. (NASDAQ:CONE) , CoreSite Realty Corp. (NYSE:COR) and others.

Amid these, accretive acquisitions and development efforts are expected to boost Digital Realty’s top-line growth. The company also focuses on maintaining a strong balance sheet and enjoys ample liquidity.

However, given the solid growth potential of the data-center real estate market, competition is expected to intensify in the upcoming period from existing as well as new players. Amid all these, an aggressive pricing pressure is anticipated in the data-center market.

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