Ranjini Venkatesan, vice president and senior credit officer at Moody’s Ratings, was the guest on the latest episode of the Nareit REIT Report podcast.
Venkatesan discussed how high the level of capital investment has been for both. Digital Realty (NYSE: DLR) and Equinix, Inc (Nasdaq: EQIX), and that is expected to remain the case.
“Over the past three years, annual investments by Digital Realty and Equinix have averaged 5.5% of their gross asset base, which is on the high side,” he said, adding that both REITs have demonstrated the ability to raise capital at healthy valuations through various credit cycles and strong leasing execution for under-construction properties.
Venkatesan said he expects both REITs “to continue to substantially re-lease their large development projects and they are increasingly using unconsolidated joint ventures to invest in the hyperscale opportunity.”
Elsewhere in the interview, Venkatesan said demand growth and existing supply constraints are leading to rapid addition of capacity, some of which may become redundant in the long term. “While we believe renewables risk will be low in the near term, it will increase as the market evolves.”
Moody’s estimates that investment in new data center capacity will be about $2 trillion over the next few years. This investment will be made in data center buildings, backup power, service and computing equipment, as well as adding new power capacity to run the centers.
