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Tech Deals Flourish With $83.3M Silicon Valley Buy

East Coast data center developer EdgeConneX has acquired three Santa Clara buildings for $83.3M as interest in Silicon Valley's data center hub grows, the Mercury News reports.

An affiliate of New York-based investment company DRA Advisors sold the properties located at 1600 and 1688 Memorex Drive and 1700 Richard Ave, which add up to about 229K SF, according to property site Reonomy.

1600 Memorex Drive, 1688 Richard Ave. and 1700 Richard Ave. in Santa Clara, California

Data centers are one of the few sectors of commercial real estate to weather the coronavirus pandemic so far. With a reliance on cloud computing remaining high, REITs in the sector are up 31.8% year-to-date compared to the commercial real estate-wide REIT average of being down nearly 11%, according to a Nareit report

As one of the two biggest data center markets in the world, Silicon Valley is seeing a proportionate share of the new activity, Cushman & Wakefield Data Center Advisory Group Director of Research Kevin Imboden said. EdgeConneX's purchase closely follows one earlier in the week by Amazon Data Services for about 66 acres south of San Jose in Gilroy.

It also follows plenty of interest for Santa Clara, the heart of Silicon Valley's data center market by virtue of its central location and lower electricity costs. The city's data centers enjoy average rates of 25% to 40% lower than nearby towns thanks to Silicon Valley Power, its energy company, according to Data Center Frontier.

"Santa Clara has received a ton of new interest of late," Imboden wrote in an email to Bisnow. "The market has always been interesting from a local occupier point of view, as there is robust fiber throughout the area for data flow and thus low latency to big tech occupiers."

In January, Amazon Web Services paid $101.4M for a 358K SF building slated to become a new data center, the Silicon Valey Business Journal reported at the time.

EdgeConneX, which has a new majority investor in EQT Infrastructure, did not respond to a request for comment.

"Santa Clara is a key strategic location for data centers, having one of the world’s highest concentration of them," Santa Clara City Manager Deanna J. Santana said in a statement. "Our city is a magnet for data centers due to our community assets, such as Silicon Valley Power which is owned by the City of Santa Clara and provides low-cost electricity, and close proximity to global tech companies."

Santa Clara has a large pipeline of new data center inventory. As of March, it had 465 megawatts proposed for development, making up all of the proposed pipeline for Silicon Valley and 78% of slated new capacity for Northern California as a whole, according to JLL. The city's turnkey vacancy rate for data centers was 5.9% in the spring, according to the brokerage. 

"[Power cost is] almost entirely the reason why Santa Clara has the predominant population of data centers in that area," Aligned Energy Global Head of Design and Delivery Mike Coleman told Bisnow earlier this year.