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Debunking the overcapacity myth

With the technology boom going bust, many studies indicate an overcapacity of telco real estate (TRE) such as carrier hotels and data centers. In the first of what will become a regular series of proprietary studies, Lehman Brothers Inc. and Cushman & Wakefield have discovered that some recent studies have overstated the amount of available capacity in the TRE market.

“While we have identified approximately 77 million sq. ft. of total TRE capacity, we believe only 43 million is active or available for lease,” said Harry Blount, a Lehman Brothers senior vice president.

To find out these results, the study was conducted on a market-to-market basis. “In most markets if you look at what’s available, there’s not a glut of capacity,” Blount said. “The big difference now is the number of customers the operators sell to has weakened dramatically. When this demand rebound comes back, we think it will be difficult to get new data centers online quickly.”

According to the study, another factor that could hold back the development of telecommunications real estate is that the barriers to entry are rising due an inability to obtain adequate power, lack of adequate locations, slowing service provider demand and a lack of capital.

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