Nuveen Real Estate: Data center — Sustainable investment in Asia Pacific
Research - SEPTEMBER 11, 2023

Nuveen Real Estate: Data center — Sustainable investment in Asia Pacific

by Andrea Zander

The continued strong growth in data requirements underpins long-term demand for quality data center space, according to Nuveen in its recent white paper.

Data center investments are also well placed to weather the economic downturn thanks to steady income flows. Data center customers/tenants are willing to commit to long lease terms because it can be challenging to find space suited to their requirements. Once data centers have matured and are fully operational, they present good core/core-plus yield assets.

Highlights of the report include:

  1. Data center sustainability
  • While data centers play a critical role in the digital economy, they consume significant resources, especially energy and water. Data centers account for 3 percent to 4 percent of greenhouse gas emissions globally, and heat rejection of cooling systems is typically evaporation, which consumes significant amounts of water.
  • The generation source of the electricity consumed by data centers is of material consideration. Data centers in a location with lower grid carbon intensity and access to renewable energy through power purchase agreements (PPAs) or renewable-energy certificates (RECs) may present a more favorable option for data center operations than those locations with “dirty” grids and low access to renewable energy.
  1. Priority considerations for environmental performance
  • Data center operators understand the need to improve environmental performance in the sector, with a recent JLL study finding that becoming more sustainable and socially responsible is the no. 1 priority for data centers in Asia. The same study found that the top features undertaken by operators to drive more sustainable operations include:
    • Building management systems, including automatic controls and submetering
    • Airflow management solutions (e.g., hot-cold aisles)
    • Artificial intelligence/machine learning controls for air conditioning
    • Peak shaving using uninterruptible power supply (UPS)
    • Direct-to-chip or cold-plate technologies
    • Rainwater harvesting systems
  1. Net-zero carbon, carbon neutrality and data centers
  • Data centers consume large amounts of energy and water in their operations. While progress is being made to improve resource efficiency with new technologies, means of operating and improved design/construction practices, considerable residual carbon emissions (both embodied and operational) and consumption will have to be addressed.
  • Data centers are critical infrastructure, and demand for them will only increase in the decades to come. It is therefore positive that institutional investors with a focus on achieving net-zero carbon (NZC) are active investors in the sector. This will continue to push the boundaries of the sustainability standards that these buildings can achieve and present the opportunity to be a key part of the transition to a low-carbon economy.

To read the full report, click here.

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