Investor interest in data centers is surging as the once-niche segment continues its winning streak.
Ninety-seven percent of those participating in CBRE’s Global Data Center Survey said they plan to funnel more money toward data centers this year, up from 89% in 2023. The remainder said they would maintain their current allocations, with not a single investor planning to rein in funds.
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Wholesale confidence in data centers comes as cloud computing and technologies like artificial intelligence and machine learning become more ubiquitous. At the same time, the sector is facing utility constraints and long lead times on necessary construction equipment, which is keeping new supply muted.
Despite those challenges, the pace of construction is accelerating in certain markets. Developers in Dallas-Fort Worth are rushing to bring new centers online amid record leasing levels, with NTT Data, Stack Infrastructure, Databank, Skybox and Compass all announcing new or expanded projects.
“It’s full speed ahead,” Ali Greenwood, executive director for Cushman & Wakefield's Global Data Center Advisory Group, told Bisnow in a previous interview. “We haven’t had anybody tell us that Texas or DFW doesn’t check a really great box from a data center development perspective.”
Total transaction volume across North America was $4.8B in 2023, a 29% increase year-over-year even as the number of sales declined, per CBRE.
Large institutional groups in particular are among the most eager to double down on allocations, with a large chunk holding a relatively small number of data centers relative to other asset types. Private equity groups like Starwood Capital, Blackstone and Brookfield have all announced multibillion-dollar investments in the space.
More recently, logistics giant Prologis announced it would also dip into the sector, launching a dedicated data center arm that could make it one of the largest players in the industry.
The value-add segment is getting the most investor attention as core and core-plus assets grapple with higher inflation and interest rates, according to CBRE's report. The desire for move-in-ready assets has also grown, a notable shift away from the longstanding preference for interior raw space.
Investors see the most potential in build-to-suit projects for hyperscalers, or companies that produce large amounts of data, such as Amazon, Microsoft, Google and Meta. The size of those campuses has grown rapidly over the last decade, with some companies now exploring the feasibility of gigawatt-scale projects.
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