Global Data Center Market Overview
95% of respondents plan to increase their investment in the data center sector in 2022.
45% of respondents anticipate continued cap rate/yield compression in 2022.
Demand for data centers by global investors remained robust in the second half of 2021, with record-breaking M&A activity. Investors of all types increased their capital allocations to the alternative asset class. Despite the prospect of interest rate increases and the on-going pandemic, data center asset yields/capitalization rates compressed in 2021, with select trades in the mid-to-high-3% range for core product. The imbalance between the growing capital allocated to the sector and the relatively limited supply of for-sale assets resulted in a highly competitive global marketplace. Investors eager to capture higher yields have broadened their geographic reach to developing markets and regions, further globalizing and institutionalizing this highly resilient and defensive asset class.
Nearly 95% of respondents to CBRE’s 2022 Global Data Center Investor Sentiment Survey, many of whom are the world’s largest institutional real estate investors, plan to increase their capital deployment in the data center sector this year. None of the more than 115 respondents plan to decrease their investment.
Investor interest remains robust across the risk spectrum, with approximately 50% of respondents expressing interest in opportunistic/new development, value-add and core-plus offerings. Interest in core offerings, however, declined to 40% from 50% year-over-year, as valuations reached record highs for core product. While many investors cited high valuations, intense competition and limited availability of for-sale assets as their greatest challenges to achieving their current investment strategies, 24% also responded that the limited number of qualified management partners made investment difficult. There remains significant opportunity for experienced investment and operating professionals to partner with aggressive global investors looking to benefit from their sector expertise. Growing investor interest, coupled with a limited number of direct investment opportunities, has resulted in a continued decline in data center assets yields/cap rates over time. Nearly half of survey respondents expect further yield/cap rate compression in 2022.