REIT Rankings: Data Centers

Nov.29.16 | About: Digital Realty (DLR)
Hoya Capital Real Estate

Summary

The best performing sector over the past two years, data center REITs have stumbled of late as higher interest rates have dragged down the high-flying sector.

Q3 earnings were moderately strong, but high expectations have outpaced reality in recent quarters. Leasing concerns continue to linger, but long-term secular demand trends continue to be positive.

The election should be a net positive for demand as changes to the tax code may encourage business investment. We anticipate increased spending allocated toward migrating to the cloud.

Data center REITs continue to appear attractive across most of our valuation metrics.

We provide an overview of the data center REIT sector and analyze recent developments over the past quarter.

REIT Rankings Overview

In our “REIT Rankings” series, we introduce readers to one of the 13 REIT sectors. We rank REITs within the sectors based on both common and unique valuation metrics, presenting investors with numerous options that fit their own investing style and risk/return objectives. We update these rankings every quarter with new developments for existing readers.

We encourage readers to follow our Seeking Alpha page (click “Follow” at the top) to continue to stay up to date on our REIT rankings, weekly recaps, and analysis on the REIT and broader real estate sector.

Data Center Sector Overview

Data center REITs comprise roughly 6% of the REIT Index (NYSEARCA:VNQ). Within our market value-weighted data center index, we track five of the six data center REITs within the sector, which account for nearly $30 billion in market value: CoreSite (NYSE:COR), Digital Realty (NYSE:DLR), DuPont Fabros (NYSE:DFT), CyrusOne (NASDAQ:CONE), and QTS Realty (NYSE:QTS).

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