• Data center REITs have a higher average enterprise value than nearly any other asset class.
• Implied cap rates are the lowest, at 4.4%.
• Tower REITs have the highest average enterprise value, while office REITs have the lowest.
• Tremendous value can be created by aggregating assets into a portfolio and pursuing an IPO.
• The data center asset class is still in an early growth phase, and the industry is poised to change dramatically in the years ahead.

Data centers have dominated headlines for some time. From major development announcements reaching into the hundreds of millions (or even topping one billion dollars) to strong M&A activity, REIT privatizations, AI-driven technology advancements, and fundraising, this asset class is on investors’ minds.

This momentum also holds in the public markets. According to a recent Barclay’s research report, the data center REIT sector—represented by Digital Realty, Equinix, and Iron Mountain—has a higher average enterprise value than any other asset class outside of the tower space. In aggregate, their enterprise value tops that of all industrial REITs combined, which includes a total of eight REITs.

As a result, data centers are attracting capital from multiple directions, driving pricing. Implied cap rates for the space were the lowest among all asset classes at 4.4%.

Colliers Insight

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Over the next few years, the data center landscape will look very different than it does today, creating opportunities for investors. Those looking to aggregate assets and create new enterprises stand to monetize these investments in multiple ways. Historically, portfolios trade at a premium to individual assets, offering an exit to a single buyer. The strength of the public markets could result in future IPO activity and an expansion of traded REITs. This is not an easy endeavor given the high cost of entry, but it offers substantial upside in the future.

The development pipeline is robust, fueled by market demand for new space across the country. Major markets are expanding at a rapid pace, while secondary markets are ramping up to top-tier capacity levels. Meanwhile, municipalities with access to land and power are seeing substantial investment, putting them on the map.