Investment in data center properties is an emerging market that has consistently grown due to technological advances. This investment option is becoming even more appealing to commercial real estate investors recently.
Real Estate Creativity When Looking for Data Center Properties
With the demand for cloud storage increasing at an alarming rate, most commercial real estate investors have become creative in looking for data center properties. Some own or lease to reduce the data center related expenses. Besides, some opt to renovate the existing building and design to meet their requirement.
Besides, the leasing volumes have dominated the industry due to the diverse pool of end-user demand. The location and sites must be enough to support the intended operations. For example, Amazon Web Services has predicted the need for new data centers, as they currently own cloud infrastructure in 22 regions. To effectively serve customers, most companies consider investing in building new data centers close to population centers.
Supply and Demand Challenges
As commercial real estate investors’ appetite for data centers increases, the supply-demand issue has also grown – finding supply and demand that meets investors’ criteria is a problem. Additionally, some of the available data centers may be outdated to meet the current demand standards.
Requirements for Data Center Buildings
For commercial real estate investors, the site selection process’ success is crucial as they ensure that clients have access to consistent and secure data. There is increased dependence on digital infrastructure by several industries, such as banking, e-commerce, IT, capital markets, education, and social media. As a result, both small and large digital companies continue to establish new properties to handle the increased load. High intensity and stable power supply are the essential requirements when building a data center property.
Unprecedented Opportunity
In the long-term, data centers’ demand promises to rise as more companies in the education and healthcare industry shift to digital technology platforms. The prospects for growth seem high as governments and telecom companies start building 5G networks to facilitate more data handling. In addition, there is a need for more networks that are robust and video conferencing apps, (such as Zoom), educational portals, gaming, cloud computing platforms, VPN specialist, and streaming media.
Also, more universities and other education providers have diversified their IT services and demand for reliable networks. Digital services are a useful tool to continue operations during massive lockdowns. Therefore, commercial real estate investors should look for the right buildings and premises that can cater for these requirements.
The Future of Data Center and Real Estate
Currently, large global investors have entered the data center industry through acquisitions. As digital businesses remain incredibly robust, continued investment in the data center space is likely to occur. Service and technologies, such as artificial intelligence, cloud computing, and the internet of things (IoT), continue to take center stage. Therefore, to keep up with these innovations, the world should be ready for the data revolution. For this reason, it is quite evident why the commercial real estate sector is attracted to data center properties. Besides, the market growth of investment in data is a direct indicator of increased opportunities for several investors.
As a result of the high demand for data center properties, commercial real estate investors continue to hunt for more of these properties.
