CoreSite Cranks Up Data Center Construction Spending

CoreSite Realty is planning to spend more money on data center construction this year than in any past year, and the big property it is planning to buy in Northern Virginia for $60 million is part of this capital-deployment push.

By the end of this year, the data center REIT expects to invest $260 million in capital, $220 of which will go to data center construction, Steve Smith, senior VP of sales at CoreSte, said. Its normal yearly capital expenditures range between $130 million and $160 million, he said.

But this isn’t a normal year, with demand for data center space outpacing supply in all major US markets. CoreSite and its competitors, other top data center REITs, are racing to expand capacity in those markets to take advantage of all the demand, a lot of it coming from top cloud providers, who are also quickly expanding data center capacity as they compete for share of the growing cloud services market.

“We’re deploying more capital here than we ever have, by almost 2X,” Smith said. “We’re not slowing down, that’s for sure.”

In the second quarter alone, CoreSite kicked off construction of an 8,000-square foot expansion in Denver, placed into service a nearly 140,000-square foot data center it built for a single client in Santa Clara, California, as well as 50,000-square foot and 40,000-square foot expansions in Northern Virginia and Los Angeles, respectively. The company is also nearing completion of its latest multi-tenant data center in Silicon Valley called SV7.

See also: CoreSite Realty: Strong Q2 Overshadowed By CEO Tom Ray’s Departure

Last week the company announced that it has agreed to buy a 22-acre light industrial/flex office park in Reston, Virginia, which is 0.3 miles from its two existing Reston facilities, VA1 and VA2. It expects to close the deal in the fourth quarter but has already started going through the initial steps necessary before kicking off data center construction.

The site, called Sunrise Technology Park, has four existing buildings, totaling 315,000 square feet. CoreSite believes it can build out more than 660,000 square feet of data center capacity on the parcel in multiple phases.

It will essentially be an expansion of the existing nearby Reston campus nearby, Smith said. The future campus will have direct network links to the existing one, meaning its future tenants will have access to the many networks and cloud service providers who are the company’s current customers in Reston.

See also: What's Behind CoreSite's Fortune 100 Channel Partner Deals

The company expects to spend about $90 million on the first phase of construction at STP, which will entail redevelopment of an existing 48,000-square foot industrial building to turn it into a data center, construction of a new 90,000-square foot data center shell, as well as another 90,000-square foot building that will house infrastructure to support these and future data centers on the campus.

How quickly CoreSite will build out the campus will depend on its ability to pre-lease capacity there, Smith said. “We've had some good interest so far. There’s a decent amount of inventory that’s in play already.”

CoreSite isn’t the only data center provider with big expansion plans in Northern Virginia, the biggest and most highly sought after data center market in the US. CyrusOne recently bought land in Loudoun County for its third data center in the market. Another example is DBT-DATA, which acquired land for data center construction in Ashburn and Sterling.

Developer Corporate Office Properties Trust also recently announced that it has bought about 60 acres of land in Prince William County, where it plans to build two massive data centers for a single Fortune 500 client. COPT, which has built data centers in Northern Virginia for Amazon, didn’t name the client in this particular deal.

See also: Data Center Market Spotlight: Northern Virginia