Data Center REIT CyrusOne Enjoying Benefits of Scale

Gary Wojtaszek, president and CEO of CyrusOne, Inc., (NASDAQ: CONE), joined REIT.com for a CEO Spotlight video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.

Wojtaszek explained that CyrusOne is one of the largest data center companies in the country, concentrating on serving Fortune 1000 companies. CyrusOne began with one data center in 2001; its portfolio now includes more than 30 facilities across three continents.

Wojtaszek noted that mergers and acquisitions activity in the sector has been rising during the last year: “It’s a great sign for the industry; it’s showing that it’s maturing,” he said.

One trend that Wojtaszek has observed, both industry-wide and at CyrusOne, is that customers are deploying in multiple locations across the United States. “To the extent that you have a larger platform to hold those customers in, you are going to enjoy the benefits of scale.”

Wojtaszek said that recognition of this trend was a factor behind the company’s recent purchase of Cervalis Holdings LLC, a privately-held operator of four data center facilities and two work area recovery facilities serving the New York metropolitan area.

“They have built the preeminent financial services practice in the New York metro area, which really complements our customer penetration greatly. It rounds out our portfolio,” he said. Financial services now accounts for about 20 percent of CyrusOne’s business, equivalent in size to its oil and gas data center business.

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Meanwhile, the trend toward outsourcing data center operations is still in the early stages, according to Wojtaszek. The business is being driven by the explosion of data demand, he said, which is showing no sign of slowing down. That rapid growth is the force behind the mergers and acquisitions activity, he said, while also causing “logistical challenges” for Fortune 1000 companies.

Looking ahead, Wojtaszek sees plenty of opportunity for CyrusOne to expand its footprint.

“We still think only 15 percent to 20 percent of the  market is outsourced currently, so there’s a huge opportunity to grab the other 80 percent of the business that is still done internally, in addition to all the growth that’s going to occur due to the data explosion that’s staring us in the face,” Wojtaszek said.