Digital Realty Sees Growing Interest in its 'Meet-Me Rooms'

SAN FRANCISCO-Digital Realty Trust is finding increasing interest in its “Meet-Me Rooms,” where communications companies pay high prices in order to hook up with each other. It may sound provocative, but it’s nothing of the sort. The publicly held and locally based owner and manager of corporate data centers and Internet gateways says it signed 18 new leases with new and expanding customers for the rooms, wherein communications companies cross connect their networks. Albeit as much an amenity for its tenants as a profit center, a company source tells GlobeSt.com the company recently increased its earnings guidance with regard to the product. “It’s a growing portion of our business,” he says.A Meet-Me Room is a suite within a larger building that ranges from 5,000 sf to 10,000 sf and is multi-tenanted with communications providers. The space allows telecom carriers and network service providers to cost-effectively cross connect their networks to support the buying, selling and sharing of bandwidth. “They want to be there because in their business distance from each other equals cost,” says the source.Speaking of cost, the lease rate on such spaces varies widely but it always much more expensive than leasing office space. For example, Qwest Communications pays Digital Realty $2,012 per sf per year for one space that measures just 10 sf and $472 per sf per year for another space that measures 350 sf, according to its most recent annual report. XO Communications, meanwhile, pays Digital Realty $557 per sf per year for an 80-sf space. The average lease term is five years, says the source. In its March annual report, the company said it owned about 200,000 sf of data center space coming available for lease that it plans to convert to Meet-Me Rooms. “Rather than leasing such space to large single tenants, we have converted and intend to continue to convert these spaces to multi-tenant co-location use, with tenants averaging between 100 and 1,000 sf of net rentable space,” states the company in the report. “Multi-tenant co-location is a cost-effective solution for tenants who cannot afford or do not require their own extensive infrastructure and security [and] because we can provide such features, we are able to lease space to these smaller footprint tenants at a significant premium to other uses.”Since the acquisition of our first property in 2002 Digital Realty has acquired an aggregate of 33 technology-related real estate properties with 7.8 million net rentable sf, not including space held for redevelopment. About 2.1 million sf of that total has been acquired in 2005. In August, the company picked up a 100,000-sf facility in Amsterdam. In addition, the company says it is under contract to acquire an additional five properties with approximately 200,000 sf.