By Meghan Hall
Over the course of the pandemic, connectivity needs have grown, and so has investor desirability for data centers. The once “niche” asset class has proven to be both resilient and valuable, and in major markets such as Silicon Valley, investors have taken note. In a deal that closed just recently, Menlo Equities purchased four Bay Area data centers for a combined $108.8 million. The seller, according to The Mercury News, was Digital Realty.
Menlo Equities closed on four separate deals for the assets. In the first deal, 4650 Old Ironside Drive in Santa Clara sold for $35.8 million, or about $288 per square foot. The building totals 124,400 square feet. Just next door, 4700 Ironside Drive was purchased for 28 million, or about $310 per square foot. The asset includes 90,100 square feet.
In another deal, 444 Toyama Drive in Sunnyvale, a 42,100 square foot building, was purchased for $25.6 million, or around $608 per square foot. The asset was originally constructed in 2004.
Finally, Menlo Equities paid $19.4 million for 2950 Zanker Rd. in San Jose. The asset totals 69,700 square feet.
The portfolio’s seller, Digital Realty, owns more than 290 data centers in 24 countries around the world. In Silicon Valley alone, the firm owns 12 data centers, including 1725 Comstock Street, 2820 Northwestern Parkway, and 3011 Lafayette Street, all in Santa Clara.
Over the first half of the year, financial, tech and healthcare companies have driven data center spending, resulting in “skyrocketing” enterprise-level demand for data center assets, according to a report released this month by JLL.
“The increased activity reflects the evolving landscape of the pandemic and the global progress on vaccine administration and restriction lifts,” JLL states.
In the first half of the year, absorption reached 273.6 megawatts (MW) across 14 domestic markets. This is the second highest amount on record, going back to 2018. In Northern California, demand sat at about 20 MW. Demand for data centers is only expected to continue to grow, peaking investor interest and bringing more players into the space.