Property Investors Swap Office Blocks for Data Centers
As the work-from-home (WFH) trend continues in 2022, thanks to the recent spike in illnesses caused by the Omicron variant, commercial real estate investors are shifting their sights from under-performing office buildings to data centers.
Transactions for global data centers reached a record high of $47.1 billion in 2021, Synergy Research Group reported, more than three times the value in 2019, and up from $34.5 billion in 2020.
In spite of this rapidly accelerating growth, data center stocks haven't delivered the flashy returns other asset classes have. As Green Street reported in this issue of the Wall Street Journal, from February 2020 through early January, "U.S.-listed data center real-estate investment trusts delivered total shareholder returns of 30%," David Guarino, a senior analyst specializing in data centers and towers, told the WSJ.
Meanwhile, single-family rental (SFR), self-storage and industrial REITs all outperformed data center REITs during that same time period. In addition, the S&P 500 delivered 48% returns, led by top tech companies that provide big data.