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Cloud Explosion Is Boosting These REITs

We expect good growth from all four data center firms we cover, with CoreSite being our favorite.

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Matthew Dolgin: The data center industry has been hot in recent years due to the explosion of cloud services. That growth has dramatically increased cloud providers' needs for data centers, and they often outsource to third-party providers. What's more, many cloud customers use hybrid cloud models, meaning they use a mixture of their own hardware and that of their cloud providers. In such a model, they often co-locate equipment on the same premises as their cloud providers and run physical connections between them. The result is data centers realize even more demand for space, and they monetize the connections.

We expect the favorable environment to continue in the near term and for all four data center companies we cover to put up good growth numbers, but we don't think they are equally well positioned for the long term.

Matthew Dolgin does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.