Investors show strong demand for data center properties

National /
Jul.July 23, 2018 11:30 AM
A data center (Credit: iStock)

Investor interest in the data center sector remains strong, and expected future demand for their services means the sector might be strong enough to weather a downturn at the end of the cycle.

The sector has seen a handful of major deals this year as firms expand and acquire interests in data centers, according to National Real Estate Investor. Brookfield Infrastructure plans to buy AT&T Inc.’s data centers for $1.1 billion. EdgeCore Internet Real Estate, a new company, announced in February it was planning to spend $2 billion on development in North America.

Investment in U.S. data centers that touched record levels last year has continued to surge. Chicago climbed to become the third largest market in terms of inventory, but still was short on supply, according to a CBRE report.

Leasing was at an above-average pace in the first quarter, with solid rent growth in the 2-3 percent range. CoreSite, a company that owns data centers around the country, recently expanded its lease at One Wilshire in Los Angeles. The 30-story tower is a so-called carrier hotel, a high-tech property with robust telecom infrastructure meant to accommodate data centers.

Some real estate investment trusts specializing in only data center properties have posted double-digit growth this year in funds from operation, versus growth of less than 3 percent that many traditional REITs are experiencing. Funds from operation is a general measure of cash flow into the trust.

Green Street Advisors counts five such REITs with a profit margin over 60 percent, according to NREI. Their total return for June was 6.7 percent; it was down 3.1 percent through the first six months of the year. The sector saw 28.4 percent returns last year. [National Real Estate Investor]Dennis Lynch 


Related Articles

arrow_forward_ios
Howard Schwimmer and Michael S. Frankel with 3629-3963 Workman Mill Road (top) and 13943-13955 Balboa Boulevard (Google Maps)

Rexford pays $340M for 2 industrial parks

Rexford pays $340M for 2 industrial parks
Granite CEO Michael Dardick and Industrious CEO Jamie Hodari

Industrious partners with landlords to offer tenants satellite workplaces

Industrious partners with landlords to offer tenants satellite workplaces
Colorado Campus at 2041-2115 Colorado Avenue and Northwestern Mutual CEO John E. Schlifske

Northwestern Mutual picks up Santa Monica office campus for $166M

Northwestern Mutual picks up Santa Monica office campus for $166M
Hudson Pacific Properties CEO Victor Coleman and Sunset Las Palmas Studios (Google Maps, iStock)

Hudson Pacific studio revenue takes hit

Hudson Pacific studio revenue takes hit
Prop 15 property tax measure draws millions (Credit: iStock)

Prop 15 property tax measure draws millions of dollars from for and against campaigns

Prop 15 property tax measure draws millions of dollars from for and against campaigns
Golden Springs Business Center

Logistics firm inks big lease in Santa Fe Springs as industrial demand remains high

Logistics firm inks big lease in Santa Fe Springs as industrial demand remains high
Heather Crossner and the site (Credit: Google Maps)

Bridge Development plans distribution center outside Torrance

Bridge Development plans distribution center outside Torrance
Daniel J. Moore and the site (Credit: Rockefeller Group)

Rockefeller Group snags Inland Empire site for logistics centers

Rockefeller Group snags Inland Empire site for logistics centers
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...