Datacenter supply, occupancy strong in 2023; Digital Realty forms Mitsubishi JV

S&P Global Market Intelligence offers our top picks of real estate news stories published throughout the week.

Datacenter supply across North America grew 26% year over year to 5,174.1 megawatts in 2023, and construction and occupancy were also strong, according to a report from CBRE.

Datacenters with capacity totaling 3,077 MW were under construction in primary markets, up 46% year over year. Most of the datacenters being developed — at 2,553.1 MW — were preleased.

Vacancy rates for primary markers were near a record low at 3.7%, as most tenants sought to renew leases rather than look for new facilities, CBRE said.

"Vacancy rates are projected to be near record-lows in 2024, which will prompt users to shift from lengthy request-for-proposal (RFP) processes to simplified letters-of-intent (LOI) for quicker space procurement," the real estate services firm said.

CHART OF THE WEEK: US REITs trade at lower discount to NAV in February

⮞ Shares of US real estate investment trusts recorded a median 15% discount to their consensus net asset value as of end-February, down from a 15.8% discount as of Jan. 31.

⮞ Diversified REITs traded at a median 27.1% discount to NAV, the biggest discount among all REIT sectors.

⮞ Datacenter REIT, which included two companies in the analysis, was the only sector that traded at a median premium to NAV as of Feb. 29.

Real estate partnerships

– Real estate manager BGO partnered with 1Sharpe Capital LLC to purchase single-family communities directly from builders, Bloomberg News reported. BGO committed $500 million to the partnership.

– Texas-based real estate investment trust Digital Realty Trust Inc. formed a joint venture with Mitsubishi Corp. for the development of two datacenters in the Dallas metro area. The Japanese company acquired a 65% equity interest in the venture for an initial contribution of roughly $200 million. Digital Realty maintains a 35% interest in the venture. The properties are fully pre-leased long term to an S&P 100 investment grade customer, according to a release.

Top transactions

– Camden Property Trust sold The Lookout at O4W apartment complex in Atlanta to Hilltop Residential LLC for $115 million, the Atlanta Business Chronicle reported, citing property records. The property consists of 592 units at 180 Jackson St.

– NexPoint Residential Trust Inc. closed the $84.7 million sale of the 734-unit Old Farm property in Houston. The property was 91.41% leased as of March 1, according to a release.

US hotel performance

The average daily rate and revenue per available room of US hotels grew year over year during the week ended March 2, STR reported, citing data from CoStar, which provides information and analytics on property markets.

ADR was at $155.29, a 2.7% improvement from the comparative week in 2023. RevPAR went up 2.4% to $97.12.

Occupancy was down 0.3% to 62.5%.

Among the top 25 markets, Seattle reported the largest year-over-year jump in occupancy, while Las Vegas saw the highest ADR and RevPAR growth.

See key people moves in North America real estate.

REIT Replay: REIT share prices up in week ended March 1