Data centers: strategic opportunities in the digital landscape

Commercial real estate professionals are turning their focus toward a promising asset class—data centers. These facilities are the backbone of our economy, supporting the increasing demand for cloud services, artificial intelligence (AI), and advanced digital communication platforms integral to businesses across all industries. For commercial real estate professionals, the demand for facilities that create this digital backbone represents a lucrative and forward-thinking strategic opportunity.

AI and cloud services: driving demand for data centers

The ongoing rise of AI significantly influences demand for data centers and digital infrastructure. AI applications require substantial computing power and data storage to function, and data centers are integral to meeting these demands. According to the Wall Street Journal, approximately 20 percent of global data center capacity is already dedicated to AI, a figure that is expected to grow as AI becomes more embedded in everyday business operations.

Similarly, the expansion of cloud services further drives the need for data centers. Businesses of all sizes increasingly rely on cloud-based SaaS, IaaS, and PaaS solutions to stay competitive, streamline operations, and manage large volumes of data. Data centers play a crucial role in supporting these cloud services, allowing businesses to scale, deploy new applications, and increase computing power.

The data center market size is forecast to increase by USD 434.8 billion at a CAGR of 14.5 percent between 2023 and 2028. By 2026, 35 percent of data center market growth will originate from North America, showcasing the immense potential for investors who want to capitalize on the increasing demand for digital infrastructure.

For commercial real estate professionals, data centers present a stable and attractive opportunity. Our digital economy requires them, and our growing dependency on digital technologies makes data centers a resilient (albeit previously overlooked) asset class.

The evolving role of data centers in the digital economy

While data centers have traditionally supported internet connectivity and data storage, their role has evolved as businesses increasingly adopt AI, machine learning, and big data analytics. These technologies require enormous computational power, making data centers an indispensable part of the digital economy.

In addition to AI and cloud services, data centers are essential for handling the exponential growth of internet-connected devices. As 5G networks expand and more devices connect to the internet—from smart home devices to industrial IoT sensors—data centers provide the critical infrastructure to ensure fast, reliable connectivity and support.

McKinsey estimates that data center demand (measured by power consumption to highlight the number of servers a data center can serve) is expected to reach 35 gigawatts by 2030—more than doubling from 17 gigawatts in 2022. Looking forward, this long-term growth potential remains immense.

The future of work technology

Data centers are crucial to today’s digital needs and the future of technology. From supporting AI-driven innovations to enabling seamless cloud services, they are critical to keeping the digital economy running smoothly. This asset class offers long-term stability and growth potential for commercial real estate professionals, especially as industries continue to rely heavily on digital tools and infrastructure.

As businesses across industries continue to innovate and adopt the latest technologies, data centers will remain a cornerstone of the digital landscape. Walker & Dunlop can help you explore the potential in data centers, offering first-hand expertise in navigating this fast-growing market. Learn more about data centers and how our first-hand expertise can help you expand your commercial real estate strategy.

For those interested in the growing influence of digital infrastructure, this article on data center opportunities offers valuable insight into the sector’s investment potential. Industry leader Marc Ganzi shares his perspective on the future of connectivity in this Walker Webcast episode, while Walker & Dunlop’s expansion of its Digital Infrastructure & Advisory Services platform highlights the firm’s strategic focus on this dynamic space. For a broader view of how technology is transforming the built environment, this piece on the future of real estate in a digital world is a great companion read. And for macro-level investment insights, don’t miss this webcast with Blackstone President Jon Gray, where he discusses the trends shaping capital markets today.