Data Centers are an Excellent Investment Niche in 2023

Data Centers

Data centers are becoming more popular among investors wanting to diversify their holdings. Investors are interested in this relatively new asset class as global demand for faster Internet access, and greater information storage continues to grow. Data centers are increasingly becoming popular investments due to their higher potential for return on investment.

Many large organizations have realized that they can profit from their new data centers, which has contributed to this increase. They’re selling their real estate and only paying for what they require for their data usage through a sale-leaseback plan.

Because the demand for data center space remains high, It’s a good idea for companies selling data center real estate to take advantage of this opportunity. To do business, most businesses, particularly in e-commerce, require vast volumes of information. On the other side, they are unable or unwilling to maintain their complex infrastructure. They’ll continue to pay for cloud services from other companies, which in turn require massive, state-of-the-art information centers to house their servers.

Investors who understand how data centers work and the full potential of these facilities are in for a great opportunity.

Now, if you are looking for additional information or simply want to discuss financing one of these investments one-on-one all you need to do is click the link below to book a free strategy call with our team at LendCity.

Real estate and data centers

Physical servers and other related equipment are housed in information centers, which centralize an organization’s information technology. The servers and equipment are critical to the organization’s or business’s everyday operations.

There are two types of data centers: single-tenant and multi-tenant. Single-tenant or wholesale data centers handle data for a single company that takes significant amounts of data. These business parks are home to companies like Netflix and Amazon. These facilities are intended to fulfill the company’s special demands because there is just one tenant. Because tenants do not want to disrupt their services by shifting information centers, enterprise facilities are usually safe investments.

Servers for a variety of firms are housed in multi-tenant or retail buildings. These businesses merely rent as many racks of equipment as they require. They frequently have variable leasing agreements because their needs are more flexible. When compared to enterprise facilities, their flexibility costs them more in rental rates. A single tenant at these connectivity facilities typically occupies less than 5% of the space, resulting in minimal economic loss when a tenant leaves.

A region with readily available power and fiber is the optimum location for a data center. The speed with which data is transported across a network is essential when deciding where to place a data storage center. Because they have the infrastructure to accommodate quicker connections, Toronto, Montreal, and Vancouver are prime locations for data centers.

While data centers are now located around major cities, data storage centers are increasingly moving closer to end consumers. In recent years, smaller data centers have begun to appear in metropolitan locations. To encourage data centers, some cities and local governments are offering tax breaks. Regions gain from data centers because they create tax income while causing minimal infrastructural damage.

It’s not only about infrastructure when it comes to choosing the optimum site for a data center. Data centers also require highly experienced people to monitor and maintain equipment 24 hours a day, seven days a week. A successful data storage center is near a large pool of talent, such as a city center or a university town.

Design is crucial when it comes to constructing a data storage center. The quantity of space available for IT equipment has an impact on capacity – and investment potential. To keep the technology within the right temperature and humidity range, complex mechanisms are necessary. Real estate is easy to secure; infrastructure and design are far more difficult.

Discover How To Develop Real Estate With This Step By Step Guide

Investor Advantages

Data centers are a popular type of real estate. They provide a good opportunity for investors to diversify their portfolios while also providing a high return on investment.

Investors are drawn to data storage centers because they attract high-quality tenants. Datacenter tenants typically sign leases for at least ten years, providing investors with predictable revenue. Some investors have even obtained purchase agreements that allow them to fund the building of a data center while also securing a pre-committed tenant who is ready to lease it.

Data centers are essential for computer companies and every company that wants to function online. This trend will continue, ensuring a steady supply of high-quality tenants for the foreseeable future.

Data centers, unlike other investments, are not influenced by traditional economic factors that affect the possibility for return on investment. GDP growth, consumer confidence, and unemployment do not have the same influence on data storage centers. Companies require their data centers to continue operating even if they don’t have a physical location. Rather than managing these services in-house, they are willing to pay a premium to lease them.

REITs that invest in data storage centers

Investing in data centers necessitates a significant amount of money and expertise. Professional real estate investing businesses are the most ordinary investors. That doesn’t rule out the possibility of investing in this fast-developing asset.

You can profit from this real estate segment with a real estate investment trust (REIT) without having to explore the land or learn everything there is to know about servers. Instead, you can pocket the income while the trust administrators perform the legwork.

If you want to invest in a data storage center REIT, there are a few options to consider:

Summit Industrial Income REIT (TSX: SMU.UN):

Summit is most known for its industrial buildings around the country, but they’re also building data centers in important Canadian cities. They’ve teamed up with Urbacon, a private company that specializes in data center construction and management.

Brookfield Infrastructure Partners (TSX: BIP.UN):

Brookfield Infrastructure Partners (TSX: BIP.UN) is a Canadian infrastructure investment firm. Brookfield owns one of the most extensive and diverse infrastructure networks in the world. They bought AT&T’s data storage centers in early 2019 and chose Evoque Data Center Solutions to run the 31 overseas locations.

Equinix (NASDAQ: EQIX):

Equinix is situated in the United States and operates in 52 markets across the world. It is one of the most well-known REITs in the data storage center sector.

Data sotrage centers are a relatively new asset class, but they are quickly becoming a popular choice. Data centers have shown to be stable, high-performing investments for diversifying investors’ portfolios.

If you would like to learn more about how investing in these properties can help you bolster your investment portfolio, click the link below to book a free strategy call with our team at LendCity.

Investing In Data Centres, With Scott Dillingham