The data center sector has emerged as a pivotal cornerstone of modern infrastructure, driven by increasing reliance on digital technologies. As artificial intelligence, e-commerce, and IoT dominate industries, the demand for advanced data storage and processing facilities is soaring. CBRE’s 2024 Global Data Center Investor Intentions Survey highlights the sector’s remarkable resilience and growth potential, attracting institutional investors worldwide.
Rising Demand and Market Dynamics
In 2023, the global data center market witnessed record absorption levels, spurred by cloud computing and AI demands. Despite supply chain delays and power distribution challenges extending construction timelines, the market saw constrained vacancies and rising rental rates. North America led with an 18% increase in asking rates, marking the sharpest growth to date. Globally, investment appetite for data centers continues to climb, with 97% of survey respondents planning increased capital deployment this year.
Key Investment Trends
Capital Allocation Soars
- Increased Allocations: 92% of investors plan to allocate over $100 million to the sector, with 44% exceeding $500 million—significant growth compared to 2023 figures.
- Shifting Preferences: Opportunistic and value-add segments are the most sought-after investments, with interest growing from 64% in 2021 to 80% in 2024.
Focus on Turnkey Solutions
Turnkey hyperscale solutions dominate investor interest, reflecting a shift from earlier preferences for powered shell investments. This trend underscores a growing desire for ready-to-operate, scalable facilities.
Long-Term Strategies
By 2029, data centers are expected to comprise a larger share of institutional portfolios. Currently, 38% of respondents allocate less than 5% of their assets to data centers, but only 8% anticipate maintaining such levels over the next five years.
Regional Highlights
North America
- Market Resilience: Despite cap rate pressures, the region saw a 29% increase in transaction volumes, reaching $4.8 billion.
- Major Deals: Highlights include Digital Realty’s $7 billion joint venture with Blackstone and Brookfield’s $5.7 billion Compass Data Centers acquisition.
- Future Outlook: Continued development pipelines and a stable lending environment are expected to sustain growth in 2024.
Europe
- Record Growth: Transaction volumes surged by 76% year-over-year to $600 million, driven by increased demand from AI and other tech innovations.
- Investment Hotspots: The Nordic region is emerging as a preferred destination due to its affordable and renewable energy resources.
Asia-Pacific
- Recovery on the Horizon: Although transaction volumes dipped in 2023, Japan and South Korea are poised for a rebound, fueled by AI-driven demand for hyperscale facilities.
- Notable Projects: A $7 billion partnership between CyrusOne and Kepco highlights the region’s growth potential.
Latin America
- Development-Driven Growth: While transaction volumes fell to $900 million, operational capacity grew by 16%, with Brazil leading new inventory additions.
- Strategic Investments: Major players like Ascenty secured $1 billion in financing for expansions, signaling robust future activity.
Investment Evolution
Data center investments are diversifying across equity, debt, and operational platforms. Equity remains dominant, with 69% of investors involved, up from 54% last year. As institutionalization of the asset class continues, hyperscale build-to-suit opportunities stand out, with 31% of respondents identifying them as the most promising segment over the next two years.
Conclusion
The data center sector is at the forefront of global investment strategies, benefiting from robust fundamentals and evolving market dynamics. As digital transformation accelerates across industries, data centers will remain integral to enabling AI, IoT, and cloud-based applications. With strong investor confidence and strategic capital deployment, 2024 is set to be another milestone year for this rapidly expanding sector.4o
