Data Centers: The Rising Stars of Commercial Real Estate

In the fast-evolving landscape of commercial real estate, the latest trend is not towering skyscrapers or luxury hotels, but the infrastructure serving our digital economy: data centers. These are not just any buildings; they're the lifeblood of artificial intelligence, the new form of workforce housing for computers crunching vast amounts of data around the clock.

These vital facilities, far from the glamor of city centers, are cropping up in places like Northern Virginia, Columbus, Ohio, and Salt Lake City. Their utilitarian design belies a crucial function: to store, manage, and process the burgeoning data streams — everything from online interactions to smart device outputs — and enable the complex calculations of AI.

AI's Appetite for Data Centers

'Everything is AI now,' says Sean Farney, a data center industry expert. He notes the tremendous surge in demand for data centers following AI advancements. Microsoft's opening of a massive data center 15 years ago was just the beginning. The advent of AI tools like ChatGPT has only accelerated this demand, intensifying the competition among tech giants such as Microsoft, Google, and Meta to enhance their AI offerings.

The allure of AI has driven not only tech companies but also investors to pour unprecedented funds into data centers, elevating their status in real estate. According to industry veterans, this niche has transcended to become a major player in commercial real estate, outshining traditional investment avenues like offices or hospitality.

The Geography of Growth

Data center developers are relentlessly searching for suitable locations that offer the necessary resources including land, water, and power. The challenges are considerable, faced with municipal zoning laws and environmental concerns. For example, Google's recent clash with environmental authorities in Chile over a data center exemplifies these growing pains.

Despite these obstacles, demand remains unfaltering. Data centers are being snapped up even in the early phases of development, and there's a growing trend of retrofitting less-utilized buildings, such as empty office spaces, to meet the high demand for data hosting and AI computing.

Joining Forces for the Future

It's not just the tech behemoths staking their claims; real estate investment trusts and major infrastructure funds have also thrown their hats into the ring, recognizing the long-term potential. As Marc Ganzi of DigitalBridge Group puts it, data centers are the 'AI factories' of the future. With data as the raw material, they're set to churn out intelligence and insights on an industrial scale, effectively doubling their global capacity in the next decade.

datacenters, AI, realestate