Data Points for Days: Sami Badri Illuminates State of Utilization, Revenue per Unit, Leasing Backlogs, and Interconnections at CAPRE’s Atlanta Data Center Summit

ATLANTA, GA – CAPRE’s Fourth Annual Greater Atlanta Data Center & Cloud Infrastructure Summit featured a keynote presentations by Sami Badri, Senior Analyst for Credit Suisse, titled “The Acceleration of Colocation in 2019,” which dove deep into questions large and small about the state of the data center supply chain – which covers everything from Juniper and CISCO to Equinix and Digital Realty. In this CAPRE Insider Report, we highlight some data points that Badri illuminated regarding utilization, average revenue per unit, leasing backlogs, and interconnections – and what that data says about the state of the broader sector.

First up, Badri looked at utilization. “Utilization, of course, on the publicly traded site, is naturally a bit higher, than in the private market,” he began. “In the private market, utilization can be as low as 30% to as high as 100%. That is a private market phenomenon, and generally speaking, everyone wants to be 100% utilized, but everyone knows that that’s not always the case.”

According to Badri, on the publicly traded site, the industry is chugging along at a very healthy clip, with the lowest reported rate being 75% and the highest being probably in the Digital Realty and QTS range, with 87%-88%. “So once again, utilization is extremely healthy,” Badri reiterated.

Next, Badri moved onto average revenue per unit growth for the second quarter of 2019, first explaining what that somewhat opaque phrase means. “What that metric really is doing is normalizing all of the data center operators for square footage, cabinet or even electrical consumption rates (KW rates),” he explained. “If I was to take all of the annualized revenue dollars that these companies are generating per quarter, and divide that by their monetizable utilized units, the picture is once again a little bit mixed.”

For example, Badri pointed out that Equinix is actually down 4.2% year-on-year on their average unit, across the whole portfolio. The same general picture is painted for the likes of Interxion, CyrusOne, and their peers in the slide above. “Not everything is great – the key takeaway here is that you’re seeing a lot of deals being executed that have never been signed before,” he mused.

The next data point was reported backlog divided by annualized revenues. “In that specific metric, you can actually see that Switch and QTS are leading the pack,” Badri outlined. “Everyone else is actually decelerating, but this is no surprise, because the majority of hyperscale capex that is feeding a lot of this growth is also decelerating. So once again, this isn’t exactly the prettiest picture, but it’s a positive one all together.”

The last piece he touched on, before looking at the acceleration of colocation, was interconnections, referring to the slide above for some color. “I’d say that these metrics are directly correlative to software-defined networking on-ramps and Public Cloud on-ramps,” he prefaced, before asserting that this particular picture actually looks relatively okay. “But it is mixed on a quarter-by-quarter basis – kind of like the actual colocation per-unit metrics.”

According to Badri’s analysis, those two metrics are actually pretty in line with each other. “That’s not that big of a surprise,” he said. “What you should know about interconnection health is that it’s very healthy. It’s a little bit behind expectations, but it’s still perceived as very healthy from a recorded basis.”

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