Data center REITs own and manage highly specialized facilities that house the critical IT infrastructure that powers today’s economy. These properties include a variety of features to help keep servers and data safe, including uninterruptable power supplies, air-cooled chillers, and physical security. A wide variety of companies—including Amazon, Apple, AT&T, Google, IBM, Meta, Microsoft, Oracle, and Ubisoft—utilize REIT-owned data centers. Just as e-commerce has driven warehouse and distribution facility demand and design, continuing developments in artificial intelligence are expected to fuel and shape the future of data centers.
With an increasingly digital global economy, data center inventory has grown dramatically. The sector typically uses megawatts (MW) rather than square feet as its principal size measurement; one MW can generally power 1,000 homes. CBRE Research shows that data center inventory in U.S. primary markets has nearly tripled in recent years. Total inventory increased from 1,330 MW in 2015 to 3,929 MW in 2022.
Recognizing the need for indices to reflect the underling real estate that houses the economy, FTSE, Nareit, and EPRA added data centers as a property sector to the global index series in 2019. Although a relatively new addition, data center REITs accounted for 8.8% of equity market capitalization of the FTSE Nareit All Equity Index as of June 30, 2023. Data centers have captured a larger share of the index than office; its stake stood at 4.5%.
Data from the Nareit Total REIT Industry Tracker Series (T-Tracker®) for the first quarter of 2023, the latest data available, show that data center REITs delivered strong operational performance. Specifically, data center T-Tracker stats show that, on average, both funds from operations and net operating income experienced 15.0% year-over-year gains, underscoring that data center REITs have more than amply kept up with inflation.
With demand exceeding supply, data center operational performance gains and sales prices have been on the rise. Just as e-commerce has driven warehouse and distribution facility demand and design, continuing developments in artificial intelligence are expected to fuel and shape the future of data centers. According to Green Street, data center development continues to shine with profit margins north of 40%.
- 3x: CBRE Research shows that data center inventory in U.S. primary markets has nearly tripled from 2015 to 2022.
- 8.8%: As of June 30, 2023, data center REITs accounted for 8.8% of the equity market capitalization of the FTSE Nareit All Equity Index, nearly double the share of the office sector.
- 15.0%: In the first quarter of 2023, data center T-Tracker stats show that both funds from operations and net operating income experienced 15.0% year-over-year gains.
Below is a list of Nareit member companies from the data centers sector.