Goldman Sachs announced an investment of up to $ 500 million in data center infrastructure in October, and private equity firms Blackstone and KKR recently announced investments in data centers.
Data center-focused real estate investment trusts generated 19% returns in the first half of 2020, according to a recent report from JLL – one of only two REIT sectors to have seen growth. (The other sector, industrials, produced a modest return of 2%.) By comparison, returns for hotel and resort REITs fell 49%, retailers fell 37%, and floor space fell 49%. office space by 25%.
“It’s recognition that this is no longer a niche real estate market,” Lynch said.
Data centers have become an essential part of the digital infrastructure that connects people and businesses to each other and to the rest of the world, said Jon Lin, president for the Americas region at Equinix, one of the largest global data center companies.
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“We are the basis, in many ways, of this digital infrastructure,” he said.
This infrastructure is no longer the sole responsibility of technology companies. The terrorist attacks of September 11, 2001 and Hurricane Sandy in 2012 prompted many companies in various industries in New York City, such as finance and media, to rethink their information technology as protection against disaster or damage. future. Today, office closures and remote working arrangements brought on by a pandemic are prompting companies to reassess where and how they house their central nervous system.
“Many companies had previously switched to cloud-based services, but the lockdown forced them to move to the cloud much faster,” said Keith Snyder, equity analyst at CFRA Research, an investment research firm.
The demand for space in data centers is also being fueled by the growing number of businesses that use cloud services to manage their operations without having to purchase, maintain and update hardware and software. Many providers of these services want to have electronic outposts close to their customers’ servers.