What really led me to pull the trigger on my short sale was seeing how costs went up even more than inflation, but rent was basically flat.
Makes me suspect that these companies have long term leases that don’t provide for substantial rent increases.
Perhaps it has changed because of their loss of market share, but a few years ago I read Netflix was 30% of Internet traffic, and it could spike to more than half. Netflix is now doing poorly lately and cutting back spending and raising prices.
Perhaps the second biggest customer is Amazon. But supposedly AWS growth is slowing and the startup valuations that help fuel it are down 75%+.
Moreover, Amazon is hardly allergic to low margin business lines, or getting into capital intensive RE development. The fact that they often outsource data centers makes me think they are offering Amazon very sweet and unsustainable deals. I assume Amazon is the smart money in these transactions, not the REITs.
The commentator who turned me onto shorting data center REITs, a finance professor at Yale, made the point that if you are a cloud / internet traffic bull, better to just buy amzn and goog, which have declined to the point they have better valuations than the data center reits.
