Debt Markets Open, Construction to Follow

The credit crunch has had a meaningful impact on data center supply, sidelining many projects that weren't fully funded prior to the meltdown on Wall Street last fall. But the deep freeze in the credit markets appears to be thawing, as two leading colocation providers announced debt financing this week:

As we've noted, the supply of data center space is getting tight in some key markets. Now that expansion-minded colocation providers are able to raise money through the debt markets, we can expect to see new construction soon. Data center REITs Digital Realty Trust and DuPont Fabros previosuly raised debt financing this spring. These companies, along with Equinix and Terremark, are well known to lenders and have a serious track record in building and filling data centers, and thus good candidates to serve as "icebreakers" for the data center industry in the credit markets. In the short run, this market access will likely extend the "incumbent advantage" for these veteran players in the data center industry, allowing them to build while smaller and newer players must wait for the credit crunch to ease further - a development we predicted back in March 2008.