Goldman Sachs announced an investment of up to $ 500 million in data center infrastructure in October, and private equity firms Blackstone and KKR recently announced data center investments.
Data center-focused real estate investment trusts returned 19 percent in the first half of 2020 – one of only two REIT sectors that saw growth, according to a recent report from JLL. (The other sector, industrial, had a modest return of 2 percent.) In comparison, returns for hotel and resort REITs fell 49 percent, retail returns 37 percent and office space fell 25 percent.
"It's a confirmation that this is no longer a niche market," Lynch said.
Data centers have become an integral part of the digital infrastructure that connects people and businesses with each other and with the rest of the world, said Jon Lin, president for the Americas region at Equinix, one of the largest global data center companies.
Dec. 21, 2020, 6:49 p.m. ET
"We are the foundation for this digital infrastructure in many ways," he said.
This infrastructure is no longer just a matter for technology companies. The terrorist attacks of September 11, 2001 and Hurricane Sandy in 2012 caused many companies in various sectors in New York, such as finance and the media, to rethink their information technology as a hedge against future disasters or damage. Now, pandemic office closures and remote working agreements are causing companies to reevaluate where and how they house their central nervous systems.
"Many companies had previously moved to cloud-based services, but the lockdown forced them to move to cloud-based services much faster," said Keith Snyder, equity analyst at CFRA Research, an investment research firm.
The demand for storage space in data centers is also being fueled by the growing number of companies that are using cloud services to manage their operations without purchasing, maintaining, and upgrading hardware and software. Many providers of these services want electronic outposts close to their customers' servers.