Digital Realty Buys Santa Clara Building

Digital Realty Trust (DLR) has expanded its biggest Silicon Valley data center hub with the purchase of 1725 Comstock Street in Santa Clara, a 40,300 square foot commercial building adjacent to the company's existing Internet campus. The building will be retrofitted for data center use, and will soon house three of Digital Realty's 1.125 megawatt Turn-Key Datacenter pods.

The deal is the latest sign of the strong demand for wholesale data center space in Silicon Valley, and especially Santa Clara, which generally has the most affordable power in the region. Digital Realty said it plans to build out and complete all three Turn-Key Datacenters by year-end 2010, suggesting that the company already has candidates in the pipeline to fill the space. In a recent earnings call, CEO Michael Foust said Silicon Valley was one of the company's strongest markets.

"This acquisition is consistent with our strategy of adding additional redevelopment inventory to markets where we see strong demand for our Turn-Key Datacenter product," said Scott Peterson, Senior Vice President of Acquisitions for Digital Realty Trust. "The building is located contiguous to several of our facilities in Santa Clara, giving us and our customers the benefit of significant operating economies of scale, including the ability to deliver our Turn-Key product quickly and cost effectively."

Digital Realty has been an active buyer of data center properties over the last six months, it acquiring leased data centers in Silicon Valley, Boston and Virginia as part of an initiative to buy additional income properties, which generate revenue through rent from existing tenants.

With nearly $800 million in cash, the world’s largest data center developer is continuing to shop, and is expected to continue to focus on buildings in high-demand markets that can be retrofitted as wholesale data center space.

Digital Realty's Santa Clara campus is home to three data centers with a Platinum or Gold rating under the LEED standard for energy efficient buildings. Tenants include Facebook, Yahoo and NTT America.