As the COVID-19 outbreak has swept the globe, its impact upon commercial real estate sectors has been both significant and varied. One asset class seeing a resurgence of interest from investors is Data Centers. The latest report from CBRE’s Global Data Center Capital Markets contains key insights including the following:
- Data centers are the highest performing REIT sector in the first half of the year, up 17.6% as of June 30, 2020.
- As a result of the strong performance in the public markets, investor interest has been heightened.
- The sector has benefitted from the tailwinds of the COVID-19 work-from-home-environment, which has expedited cloud outsourcing and accelerated the need for data storage.
- Other demand drivers include the emergence of new technologies such as 5G, artificial intelligence, autonomous vehicles, the Internet of Things (IoT), and solid growth fundamentals.
- Drawn to steady cash flows and an investment grade tenant base, investors are attracted to core offerings.
- With limited opportunities of scale for direct investment and heightened investor interest, CBRE anticipates returns will continue to compress in the data center market globally.
- The first half of 2020 saw an increase in overall asset level investment volume in North America when compared to H1 2019.