Data Center Real Estate

 According to CBRE, data centers are poised to break records in growth this year.

They aren't beautiful. They are big, boring and boxy. They're attractive real property because they are essential to our modern lives, housing the infrastructure that allows us to shop online and work from home.

CBRE states that the power of the sector's data real estate growth is more important than square footage and that demand is on the brink of booming.

We know that there are already 500 megawatts worth of new builds in place, and almost 70% of them are pre-leased. We believe 2021 will be the record year. Then we'll accelerate," Spencer Levy (CBRE senior economic advisor) said.

"What's likely to happen soon is the rise in what's called edge computing, getting closer the consumer, due to self-driving vehicles, and because you can work remotely. He said that it's another factor driving the demand for more data center space.

More than a dozen data center real estate clusters are located in Ashburn, Virginia, just 30 minutes from downtown Washington, D.C. Bulldozers roar and cranes rise. Northern Virginia, which accounts for over 60% of the U.S. data center construction pipeline, is the largest market in the world for data centers.

"Why is it spreading from big markets such as New York and Silicon Valley to smaller markets?" Levy stated that cheaper power equals redundancy.

Bunching data centers together is a great idea. This allows for faster communication and networking effects, as well as access to the cloud, and cheap power.

Levy said, "This reminds of New York City in early 1920s when everybody clustered around Wall Street because it was important to be close together, and it's exactly what we see from a data perspective in northern Virginia."

Aligned, one the Ashburn centers, started construction last June on a second center in northern Virginia. It increased its credit facility by more than $1 million last year to help fund expansion.

Aligned, in addition to its existing backers, added new facility lenders to the company, including ING Capital and Shinhan Bank New York Branch, according to a press release.

Aligned's finance chief Anubhav Raj stated that the increase in Aligned’s secured credit facility is a reflection of their strong market position as well as rising customer demand. Aligned can accelerate its short- and long-term growth strategies with additional patient capital. This will allow it to expand to both domestic as well as global expansion opportunities.

A handful of data center investment trusts are available, and they were among the most successful REIT sectors in 2020. They finished the year up 21% CoreSite Realty and CyrusOne are the major names. Equinix, Digital Realty, Equinix, Equinix, CoreSite Realty and QTS Realty Trust are also prominent.

CBRE reports that the sector is expected to grow even more this year, but demand for data centers fell 11% last year, making it the second-best year for leasing. This was due to Covid pandemic, which caused companies to freeze their IT budgets.

However, the disease's effect on daily life, which has led to millions of people working from home, increased data demand. Although supply grew by 5.9% at major data centers there is little to worry about the fact that the market may be oversupplied.

As the economy reopens, demand should increase. Americans will return to work but will also be able to work remotely and access more streaming services. Data demand will rise due to the rapid growth of 5G technology and self-driving cars.

Levy stated that "we expect rents will stabilize and then start to rise." "But we expect rents will rise in the long-term."