5 minute read

Data Centre Dynamics: REITs and cloud service

DIGS FOR THE

DIGITAL ECONOMY REITs and Cloud Service Providers Staking Out Data Centre Space

By Barbara Carss

AT LEAST 84 commercial buildings nationwide were abuzz during protracted COVID-19-related business shutdowns earlier this year. They house the data centres that have literally underpinned the continued functioning of Canada’s economy and Canadians’ interconnectedness during the past months.

Even before a global pandemic wreaked havoc, a handful of U.S. based data centre REITs dramatically outperformed office and retail REITs in that country’s FTSE Nareit index last year. JLL reports the five specialized REITs collectively delivered a 44.2% return in 2019.

Since then, one of those REITs has increased its presence of Canada. Equinix will acquire a portfolio in 13 data centres from BCE Inc., expanding its holdings from two co-location facilities in downtown Toronto to seven new markets: Vancouver, Kamloops, Calgary, Winnipeg, Ottawa, Montreal and Saint John, New Brunswick. The $1.04-billion (USD $750 million) allcash deal is slated to close later this year, at which time more than 600 Bell customers within the data centres will automatically transition to Equinix.

“The acquisition of these 13 strategic assets further extends the depth and breadth of Equinix’s global platform,” says Jon Lin, Equinix President in the Americas. “Additionally, it opens key gateways for North America to Asia through Vancouver, and North America to Europe through the submarine cable systems in the Millidgeville [Saint John] area.”

The other U.S. data centre REIT now active in the Canadian market is also in expansion mode and planning to triple its operating capacity — from 20 to 60 megawatts (MW) — in the Greater Toronto Area. To begin, Digital Realty Trust recently opened up 6,000 square feet of new co-location space, adding 1.5 MW of capacity at its Vaughan facility, which was formerly home to the Toronto Star’s printing plant. "Toronto is a more critical market than ever as businesses recognize the growing importance of the region as one of the next major technology hubs in North America," submits William Stein, Digital Realty’s Chief Executive Officer. “We continue to expand our colocation capabilities in strategic regions around the world.”

Looking back to the fall of 2019, Digital Realty ranked Toronto in the top ten of 60 major international hubs for the digital economy. Based on indicators for economic growth, business and consumer demand, supporting infrastructure, labour force skills, openness to innovation, governance and quality of life, Toronto was also projected to nudge up two places on the so-called Digital Capitals Index, into 8th spot by 2029.

Both REITs reported gains in the second quarter of 2020. Digital Realty’s quarterly revenues of USD $993 million (CAD $1.3 billion) represented a 21% increase from the first quarter and 24% increase from Q2 2019. Equinix realized a 6% increase over Q2 2019 as USD $1.47 billion (CAD $1.92 billion) in

earnings marked its 70th consecutive quarter of revenue growth.

INVESTORS INTERESTED “Data centres have been in strong demand from the rapid growth in cloud services, especially with the growth in data and knowledge sectors and companies outsourcing. They are being used by various industries such as grocery fulfilment, retailers and banks,” says Kruti Desai, Manager, National Research Insights, with Altus Group. “From an investment perspective, based on expected continued demand, data centres are still highly sought after, offering an alternative investment product and stable returns.”

She projects large cloud service providers will gain a greater market share as organizations increasingly outsource their in-house data management services, and keepers of highly sensitive information, such as insurance and financial services and health care providers, become more confident in these third parties.

“Cloud providers are attempting to meet the needs of higher compliance standards by offering more secured services aligned with FIPPA (Freedom of Information and Protection of Privacy Act) or PHIPA (Personal Health Information Protection Act) in Ontario,” Desai says. “Demand for data centres will likely remain high, but it is expected that the demand will mostly come from large cloud service providers.”

That’s already the case in Toronto and Montreal, which, together, are home to about 70% of Canada’s data centres. Vancouver has the next highest concentration with 10, then there are four each in Calgary and Winnipeg.

“Toronto has experienced significant positive net absorption primarily driven by west coast U.S. based cloud operators. Montreal continues to grow and will further expand as telecommunications connectivity continues to improve. Demand is also primarily from U.S. west coast technology corporations,” reports Conan Lee, who is based in Seattle as Managing Director of JLL’s data centre and telecommunications advisory services. “Two major builds are occurring outside Vancouver to result in what will be the largest delivery of supply that British Columbia has ever experienced. The developments will be a true test to the theory that there is pent up data centre demand in this region.”

Among emerging trends, industry analysts like David Cappuccio of Gartner Research & Advisory point to something of an equivalent to last-mile delivery, which he terms an “infrastructure delivery strategy”.

“This puts workloads and data where they make the most sense for the business. Rather than data centres, we are moving toward centres of data, placed and optimized to provide the most business value. This also expands the role and responsibilities of central IT to one of a business enabler, rather than a purveyor of equipment and software,” he submits in a 2019 report entitled Infrastructure is Everywhere: The Evolution of Data Centers.

COVID-19’s longer term impact on that evolution is still to be determined. In the short term, data centres have clearly experienced surging traffic not recently seen on highways.

“Many companies’ technological capabilities have been tested as they’ve been forced to transition their employees to work from home and, for some, their overall digital strategy has been called into question,” Desai observes. “COVID-19 has pushed the workforce rapidly toward the digital economy.” zz

ENTER A NEW ERA Take your doors from manual to modern with the Ditec HA7

SHOW GERMS

THE DOOR

Upgrade your manual door to touch-free Limits contact with germs on door handles Perfect for bathroom, o ce, and assisted living facility doors

MEET THE

DITEC HA7 APP

Makes setup a breeze Ability to control and customize functions Available in Google Play and Apple App stores

SLEEK

AND SLIM

Sleek aesthetics built to blend in Perfect solution for limited overhead space Push and pull confi gurations Clear or dark bronze fi nishes available

EnterANewEra.com | DitecEntrematic.ca 877.348.6837

This article is from: