Data Center REITs: Tech Turbulence
Data Center REITs - a perennial performance leader in the REIT sector - are in "bear market" territory for the third time this decade as technology stocks have lost their luster this year.
Data center demand and fundamentals remain resilient and were remarkably unaffected by the pandemic and subsequent reopenings, but that's precisely the issue as investors have rotated into more pro-cyclical sectors.
The complexion of the sector changed dramatically after two REITs were taken private, while COR was acquired by AMT, but DigitalBridge and Iron Mountain have matured into serious players.
Digital Realty and Equinix continue to lean heavily on ground-up development to drive mid-to-high single-digit earnings and dividend growth, offsetting soft pricing power on hyperscale leases.
Data Center REIT valuations now appear quite attractive for growth-oriented investors as similar setbacks in 2014 and 2018 amid rising rate concerns ultimately proved to be rewarding buying opportunities.