Under the epidemic, people are forced to switch to digital office and home entertainment. This kind of work and lifestyle has severely hit commercial real estate. But experts say that it also brings a surprise to the industry: data centers.
In an increasingly interconnected world, the demand for data from businesses and consumers has increased dramatically, and they are increasingly relying on cloud-based technologies. Those buildings used to place cloud technology hardware devices also create more opportunities for developers and investors.
Pacer Financial, an investment consulting firm in Malvern, Pennsylvania, said Sean O’Hara, president of its exchange-traded funds division: “Our houses, cars, street lights and parking meters are all mutually Connected, data interaction is everywhere.”
With the widespread use of emerging technologies such as 5G and artificial intelligence, companies that provide data storage are preparing to meet greater demand.
Cyxtera has 62 data centers in 5 markets in the U.S. and Europe and Asia. CEO Nelson Fonseca said: “In fact, the epidemic has accelerated the development of data centers.”
An Equinix data center under construction in San Jose, California.
He said that Cyxtera usually leases out its data center space for a contract period of 3 years, and the company is now exploring new markets. “We see a full range of needs for data.” He said, “By 2021, we will have more opportunities.”
Senior Managing Director of the Data Center Solutions Division of CBRE, a real estate services and investment company Patrick Lynch said that the accelerated development of existing consumer behavior and labor trends makes companies need more data space. In his view, factors such as home office, online shopping and scattered employment have all become the driving force for the development of the data center industry.
This has also attracted the attention of investors. Andy Cvengros, senior vice president and member of the technology solutions division of real estate services and investment company JLL (JLL), said: “In the past 90 days, we have seen large investment funds invest in the industry A lot of capital.”
In October 2020, Goldman Sachs announced that it would invest up to US$500 million in data center infrastructure; private equity firms Blackstone and KKR also recently announced plans to invest in data centers.
According to a recent report by Jones Lang LaSalle, real estate investment trusts focused on data centers achieved a return of 19% in the first half of 2020. This is one of only two real estate trust industries showing growth (the other The industry is industrial and the rate of return is only 2%). In contrast, returns for hotel and resort real estate investment trusts plummeted by 49%, retail real estate returns fell by 37%, and office space investment returns fell by 25%.
Lynch said: “The real estate market is basically unprofitable, and this is universally recognized.”
Equinix is one of the world’s largest data center companies. The company’s president of the Americas, Jon Lin, said that data center It has become an important part of the digital infrastructure that connects people and businesses and the entire world.
This architecture is no longer limited to being owned by technology companies. The terrorist attacks of September 11, 2001 and Hurricane Sandy in 2012 prompted many companies in various industries in New York, such as financial and media companies, to reconsider using information technology as a hedge against future disasters or destruction. Nowadays, the closure of companies and telecommuting caused by the epidemic has forced them to reconsider the storage location and method of the central system.
Keith Snyder, an asset analyst at CFRA Research, an investment research firm, said: “Many companies have already started using cloud-based services before, but due to the lockdown, they have to transition
more quickly.” More and more Many enterprises use cloud services to manage their business, so that there is no need to purchase, maintain, and update hardware and software, and it also stimulates the demand for data center space. Many cloud service providers hope to set up electronic outposts near customers’ servers. In addition, more and more US companies are using a large number of complex data analysis tools driven by artificial intelligence and machine learning, which requires stronger computing power and will take up more physical space.
Milena Petrova, associate professor of real estate and corporate finance at Syracuse University, said: “You think data is an intangible asset, but the data must be stored in a realistic place.”
She said that the more data a company has to analyze, the more it will invest in servers and storage space. Larger companies may be able to purchase such storage space. But a data center can meet the storage needs of multiple companies at the same time, so for many other companies, it is cheaper to rent storage space in the data center.
Storage vendors are also trying to make leasing as simple as possible by providing flexible storage space scales and payment methods. Kven Gross of Jones Lang LaSalle said: “You can go to the cloud, swipe your card, and get the corresponding data center space on demand.”
Silicon Valley may have been hailed as the future of glory, but real estate professionals say that all over the United States All are building data centers. Most data centers are located on the outskirts of major cities such as Atlanta, Chicago, Dallas-Fort Worth, New York, and Phoenix.
A key element of site selection is to be close to the submarine cable clusters that send and receive data around the world. In the United States, the central hub of cloud computing is located in Northern Virginia.
Other factors to consider include land costs and local taxes. Building a data center will create as many as 1,000 temporary jobs. The established data center does not require a large amount of labor, but the rate of return on these jobs is high, so cities and states will compete to compete for these development projects by providing tax incentives.