Digital Realty today announced its Q1 2021 earnings and provided updates on its data center leasing activity (noting Asia-Pacific), M&A transactions, and development pipeline. In Q1 2021, Digital Realty reported revenue of $1.1bn, a 3% increase quarter-over-quarter, and adjusted EBITDA of $615m, a 6% increase quarter-over-quarter.

Leasing Activity in Q1 2021 – Digital Realty

In Q1 2021, new lease signings were $117m, down 11% from the $130m of signings during Q4 2020. In total, the new lease signings represented 57.5 megawatts of power capacity and 638k sqft. Decomposing the lease signings further:

  • Hyperscale: over 1-megawatt signings were $69.5m, equivalent to 59% of total signings
  • Colocation: under 1-megawatt signings were $32.6m, equivalent to 28% of total signings
  • Interconnection: contributed $13.3m, equivalent to 11% of total signings
  • Other: accounted for $1.7m, equivalent to 1% of total signings

Geographic Breakdown – New Leases

Digital Realty’s mix of new lease signings was relatively balanced during Q1 2021. Specifically, the Americas contributed 38%, while EMEA and Asia-Pacific added 26% and 36%, respectively.

  • Americas: new lease signings were $39.5m, for 27.0 megawatts of power capacity and 391k sqft
  • EMEA: new lease signings were $26.9m, for 13.7 megawatts of power capacity and 150k sqft
  • Asia-Pacific: new lease signings were $37.3m, for 16.9 megawatts of power capacity and 98k sqft
Asia-Pacific Strength

Overall, Digital Realty’s new lease signings in Asia-Pacific of $37.3m for Q1 2021 were well-above the company’s typical quarterly range of $15.0m to $20.0m. Specifically, Digital Realty highlighted the signing of a leading Asia-Pacific-based diversified digital economy platform in Singapore. For this customer, Digital Realty provided colocation, connectivity, and a hyperscale data hall.

Additionally, in Asia-Pacific a cloud service provider simultaneously expanded with Digital Realty in its Melbourne and Osaka facilities. Finally, subsequent to Q1 2021, Digital Realty secured a cloud service provider to anchor its Tokyo campus in Inzai.

Renewal Leases

Digital Realty signed renewal leases representing $193m of rental revenue during Q1 2021. The weighted-average lease term on renewals signed during Q1 2021 was <3 years, reflecting a greater mix of colocation of <1-megawatt. On a cash basis, these lease renewals were down 2.1%, whereas on a GAAP basis, lease renewals were up 3.2%.

M&A Transactions in Q1 2021 – Digital Realty

During Q1 2021, Digital Realty closed on the sale of a portfolio of 11 data centers in Europe for a total of $680m to Ascendas Reit, which is managed by CapitaLand, one of Asia’s largest real estate firms. The portfolio will generate 2021 net operating income (NOI) of $45m, representing a cap rate of 6.7%.

Additionally, Digital Realty acquired a 66.4k sqft building and an adjacent 4.7-acre land parcel in Brussels, Belgium for $15m. Specifically, this building and site will support the development of 13.6 megawatts of power capacity.

Development Pipeline – Digital Realty

As of Q1 2021, Digital Realty’s data center development pipeline (excluding 18 powered shell investments) comprised $3.9bn, with 307 megawatts of power capacity under construction. Overall, these projects are 32% pre-leased and have a blended target development yield of 11.3%.

However, decomposing Digital Realty’s development projects further by geography shows that over half of the company’s expansion is taking place in EMEA. Whereas the remainder of the company’s pipeline is split relatively evenly between North America and Asia-Pacific. Additionally, Digital Realty’s development yields by region show a meaningful variance:

  • North America: 9.8% development yield, for 74.3 megawatts of power capacity and 867k sqft
  • EMEA (primarily Europe): 11.3% development yield, for 154.1 megawatts of power capacity and 1.7 million sqft
  • Asia Pacific: 12.9% development yield, for 78.9 megawatts of power capacity and 837k sqft

Increasing Development Pipeline in Q1 2021

Digital Realty’s development pipeline in Q1 2021 increased by $1.1bn over Q4 2020, representing a meaningful 39% uplift. Overall, the company added 85.8 megawatts of power capacity and 807k sqft to its development pipeline quarter-over-quarter. Notable markets where Digital Realty is allocating incremental capital towards include:

  1. Frankfurt, Germany: incremental investment of $333m, for 23.4 megawatts of power capacity and 269k sqft
  2. Paris, France: incremental investment of $287m, for 19.2 megawatts of power capacity and 65k sqft
  3. Portland: incremental investment of $167m, for 18.0 megawatts of power capacity and 136k sqft
  4. Madrid, Spain: incremental investment of $63.2m, for 5.0 megawatts of power capacity and 75k sqft
  5. Singapore: incremental investment of $55.3m, for 9.8 megawatts of power capacity and 69k sqft

Increasing Development Pipeline – Details

Digital Realty is extending its highly-connected legacy-Interxion campus in Frankfurt and began construction on its Neckermann expansion parcel. In Q1 2021, the company broke ground on the first 26 megawatts on the expansion campus, which is scheduled for delivery in 2022.

In Paris, Digital Realty continues to develop its Paris Digital Park. Importantly, as of Q1 2021, Google Cloud’s Dunant subsea cable which links Paris to Virginia Beach now connects in to the company’s Paris campus.

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. Mary has over 5 years of experience in research and writing for Data Centers.


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