Well, it had to happen sooner or later. Today DuPont Fabros (DFT) suspended construction on a new datacenter project in Santa Clara. They had needed some $300-400M to fund the project, but were only able to raise $100M from a syndicate led by Keybank. Instead, they will use those funds to buttress other projects.
On the one hand, it’s disappointing to see that the credit markets will slow expansion in the datacenter space. New facilities require huge initial outlays, as seen by the capex levels of Equinix, Switch and Data, Digital Realty Trust, and others in the sector. It was inevitable that the credit crisis would have an effect somewhere soon, even if we do wish it would just leave us alone. I suspect we may hear of similar reduced expansion plans at the Switch and Data call later today.
But on the other hand, maybe there is a silver lining on that thundercloud. There was so much construction, so many new projects, that one had to wonder if the sector isn’t overbuilding. After all, all that square footage would be dedicated to racks and racks of servers serving data to fulfill explosive traffic growth that is currently still a twinkle in John Chamber’s eye.
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