In Q2 2020, CoreSite reported new leasing of only $3.5m in annualized rent, showing the COVID-19 impact on its business. In total, this leasing was for 22.2k sqft of space. Overall, this leasing represents average pricing on new signings of $156 per sqft. Comparatively, CoreSite’s average quarterly leasing over the past four quarters has been much greater, at $15.1m in annualized rent. Similarly, average pricing on new signings has been higher at $197 per sqft.

CoreSite’s Q2 2020 leasing, represented its lowest quarterly volume since Q3 2012. This was driven entirely by enterprise / retail colocation customers, as CoreSite did not sign any hyperscale leases. However, even CoreSite’s data center competitors, with less of a hyperscale focus, were able to achieve substantially greater leasing activity during the quarter.

Part of the reason behind CoreSite’s low leasing growth has been its disciplined pricing strategy. Whereby the company has not chased after lower return, larger megawatt hyperscale deals. By focusing on enterprise / retail colocation, CoreSite has generated the highest returns on invested capital in the data center sector. At the same time, CoreSite is not reliant on the few hyperscale customers that dominate hyperscale leasing. These hyperscale customers include Amazon Web Services, Microsoft Azure, and Google Cloud.

CoreSite’s COVID-19 Headwinds

However, because of CoreSite’s positioning towards enterprise / retail customers, the company has faced unique headwinds. Particularly, these headwinds have been driven by an elongated sales cycle stemming from COVID-19 uncertainty for enterprise decision-making.

Specifically, CoreSite’s Chief Revenue Officer, Steven Smith spoke about the COVID-19 uncertainty the company is experiencing. Smith stated on the company’s Q2 2020 conference call that the “ongoing pandemic has elongated the buying patterns for enterprise customers as they become more deliberate in assessing the impacts of current market conditions on their own business”.

Further detail on COVID-19’s continued impact on CoreSite’s leasing ability will be highlighted and closely monitored on CoreSite’s upcoming Q3 2020 conference call on October 29, 2020.

CoreSite operates 24 data centers, representing ~250 megawatts of power capacity and 3.0 million sqft, in the United States.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne, CoreSite Realty, QTS Realty, Switch Inc, Iron Mountain (NYSE: IRM), Cyxtera (NASDAQ: CYXT), and many more. Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing.

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