Data Center REITs: Big-Tech Looms Over Cloud Boom

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• After jumping 50% between 2016 and 2017, data center REITs delivered an uncharacteristically weak 2018, dipping 14% last year despite a continued boom in data center demand.
• Data center leasing smashed records in 2018, jumping more than 30% for data center REITs, powered by a nearly 50% surge in capex spending from hyperscale providers.
• A concern for investors, the competitive landscape is quickly shifting as these "big tech" hyperscale providers are increasingly dictating the terms of the still-symbiotic relationship between REITs and their tenants.
• Digital Realty expects half of all data center servers to be operated by just a half-dozen hyperscale providers by 2021, up from 25% today, increasingly resembling cell tower industry dynamics.
• For now, the substantial secular tailwinds driving data demand and network densification including 5G, artificial intelligence, and blockchain technologies are enough to keep hopes high for continued growth.