KeyBanc Overweight on Specialty Office/Industrial Outlook: Favors COR & DFT
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Price: $318.04 +1.06%
Rating Summary:
10 Buy, 16 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
10 Buy, 16 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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KeyBanc on Specialty Office/Industrial Outlook: Overweight
KeyBanc analyst said, "We have separated the data center and lab space names from the mixed office and industrial REIT group given the highly specialized and highly improved nature of these assets. Although lab space fundamentals remain steady, we remain more constructive on the demand for data center space. We view CoreSite (NYSE: COR)(PT raised from $18 to $22) and DuPont Fabros (NYSE: DFT) as the best opportunities in the space, given their relatively attractive valuations and premium growth prospects. We are downgrading Digital Realty (NYSE: DLR) to HOLD from BUY herein.
"We view the complement of secular demand for data center space and contained new supply as a haven in an otherwise uncertain environment. Data center outsourcing via the cloud, vast growth in mobile media and content over the internet, and other steady drivers will likely remain a source of demand for this space over the foreseeable future. While renewed macroeconomic concerns could certainly dampen demand for data center space, we suspect the potential for operating cost savings could accelerate IT outsourcing and the adoption of the cloud (i.e., as in 2008-2009). Similarly, renewed caution could further limit the development of new space. Given low leverage and a generally sober fundamental outlook by the public data center REITs, we would expect continued outperformance from this group in 2012."
"Data center supply in check: Overall, vacancy and available megawatts in the six markets we track have remained flat since our September report, with slight variations in each market. Since April, availability has remained at roughly 14% despite delivery of expansion space that increased existing inventory from 9.98 million gross square feet to 10.7 million gross square feet (814 MW to 884 MW), signaling healthy net absorption and disciplined construction activity."
"Chicago remains the most favorable data center market from an availability standpoint, as nearly 80% of space under construction is pre-leased, leaving only 5 MWs left to lease (DFT’s CH1 Phase II). Northern Virginia remains a landlord’s market despite experiencing the most deliveries since April, while Northern New Jersey continues to have the highest overall availability."
KeyBanc also downgrades BioMed Realty Trust (NYSE: BMR), PT $16...BMR’s valuation appears rich at a 6.8% implied cap rate relative to our growth expectations and the capital intensive nature of lab space assets.
KeyBanc analyst said, "We have separated the data center and lab space names from the mixed office and industrial REIT group given the highly specialized and highly improved nature of these assets. Although lab space fundamentals remain steady, we remain more constructive on the demand for data center space. We view CoreSite (NYSE: COR)(PT raised from $18 to $22) and DuPont Fabros (NYSE: DFT) as the best opportunities in the space, given their relatively attractive valuations and premium growth prospects. We are downgrading Digital Realty (NYSE: DLR) to HOLD from BUY herein.
"We view the complement of secular demand for data center space and contained new supply as a haven in an otherwise uncertain environment. Data center outsourcing via the cloud, vast growth in mobile media and content over the internet, and other steady drivers will likely remain a source of demand for this space over the foreseeable future. While renewed macroeconomic concerns could certainly dampen demand for data center space, we suspect the potential for operating cost savings could accelerate IT outsourcing and the adoption of the cloud (i.e., as in 2008-2009). Similarly, renewed caution could further limit the development of new space. Given low leverage and a generally sober fundamental outlook by the public data center REITs, we would expect continued outperformance from this group in 2012."
"Data center supply in check: Overall, vacancy and available megawatts in the six markets we track have remained flat since our September report, with slight variations in each market. Since April, availability has remained at roughly 14% despite delivery of expansion space that increased existing inventory from 9.98 million gross square feet to 10.7 million gross square feet (814 MW to 884 MW), signaling healthy net absorption and disciplined construction activity."
"Chicago remains the most favorable data center market from an availability standpoint, as nearly 80% of space under construction is pre-leased, leaving only 5 MWs left to lease (DFT’s CH1 Phase II). Northern Virginia remains a landlord’s market despite experiencing the most deliveries since April, while Northern New Jersey continues to have the highest overall availability."
KeyBanc also downgrades BioMed Realty Trust (NYSE: BMR), PT $16...BMR’s valuation appears rich at a 6.8% implied cap rate relative to our growth expectations and the capital intensive nature of lab space assets.
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