Keepin' It Real 

Economics, Housing, & Commercial Real Estate Analysis

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  • Alex Pettee, CFA

Data Center REITs: Sunlight Through The Clouds

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  • Surging more than 40% this year, Data Center REITs have bounced back in 2019 following the worst year for the sector since NAREIT formally began tracking the group in 2015.

  • Storm clouds have been building around the high-flying technology-focused sector as intense competition and furious supply growth have weakened pricing power.

  • Global IT spending has slowed significantly in 2019 as businesses temper growth plans, citing macroeconomic and trade uncertainty. Despite this, data center REITs have outperformed.

  • Second-quarter earnings results brought a ray of sunlight through the clouds. Leasing activity, the most closely watched metric, was significantly better than expected.

  • Operating in a highly competitive industry, value creation isn't coming as easy as it once was. While robust demand for data center space will continue, the outlook for the REITs themselves remains cloudy.

The home of the "cloud," Data Center REITs are the physical epicenter of the internet. Typically housed in windowless industrial-style buildings surrounded by massive generators and cooling equipment, data center REITs provide the infrastructure - power, cooling, and physical rack space - to a variety of customers with different networking and computing needs, who install and manage their own server and computing equipment in the facilities. Typically housing millions of terabytes of mission-critical data for thousands of individual customers, physical data security and operational reliability are crucial attributes of data center facilities. Data center REITs consume roughly three percent of all electricity generated on the planet.

To read the full report, click here to read SeekingAlpha!

For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Student Housing, Single-Family Rentals, Manufactured Housing, Cell Towers, Healthcare, Industrial, Data Center, Malls, Net Lease, Shopping Centers, Hotels, Office, Storage, Timber, and Real Estate Crowdfunding.

Disclosure: An investor cannot invest directly in an index and index performance does not reflect the deduction of any fees, expenses or taxes. The information presented does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. We consider the information in this presentation to be accurate, but we do not represent that it is complete. It should not be relied upon as the sole source of suitability for investment. Please consult with your investment, tax or legal adviser regarding your individual circumstances before investing. Visit our website for a complete definition of all indexes cited in this report. Investing involves risk and loss of principal is possible.

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Hoya Capital Real Estate ("Hoya Capital") is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the real estate industry. It is not possible to invest directly in an index. Index performance cited in this website or commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Hoya Capital has no business relationship with any company discussed/mentioned. Hoya Capital never receives compensation from any company discussed/mentioned. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings and other important disclosures and definitions are available by clicking the links below.

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