Real estate for data centers is having a moment

Companies race to find space to keep up with demand for streaming services

National /
Oct.October 23, 2020 10:15 AM
Consumers are using streaming services more than ever, and data center real estate is booming (iStock)

Consumers are using streaming services more than ever, and data center real estate is booming (iStock)

 

Real estate for data centers is booming as the popularity of streaming services like TikTok drives demand.

Digital Realty Trust, a $41 billion real estate company and one the country’s largest data-center developers, will develop a 600,000-square-foot compound after receiving a major commitment from Bloomberg LP, the parent of Bloomberg News, Business Insider reported.

While hotels and retail have been pummeled during the pandemic, demand for streaming services has surged. Nielsen, which tracks audience behavior, reported that U.S. consumption of streaming content was up more than 30 percent in the first three quarters of 2020. Although the sector was growing before the pandemic, the infrastructure to support the streaming that lockdown-weary Americans want depends on space to store servers remotely.

While the real estate investment trust market overall has declined 12 percent this year, data center real estate investment trusts have flourished, rising on average by about 25 percent.

Institutional investors are taking notice, as well. A division of Goldman Sachs will invest $500 million for $1.5 billion of data center acquisitions in the U.S. and around the world. Last week, Apollo Global Management announced the purchase of about 500 cell towers and sites for cell tower development in anticipation of the 5G cellular network.

Private equity firm KKR said it would invest $1 billion to buy and develop data centers in Europe, and last year, Blackstone said it had acquired a 90 percent interest in seven data centers in Virginia valued at $265 million.

“Only 30 percent of companies have moved their data storage off premises into a data center so far,” Nadeem Meghji, Blackstone’s head of U.S. real estate investments, told Business Insider. “That adoption will grow.”

[BI] — Georgia Kromrei


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