- January 1, 2023: Vol. 15, Number 1

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A bright spark: Data centres are more than just the hottest sector

by Tim Lin

Data centres — once just obscure buildings hosting server racks — have risen in prominence to become one of the hottest property sectors investors are looking at today.

A global data centre investor sentiment survey conducted by CBRE in 2021 revealed nearly 95 percent of more than 115 respondents, many of whom are among the world’s largest institutional real estate investors, were looking to increase their capital deployment in the data centre sector. At the same time, growing investor interest, coupled with a limited number of direct investment opportunities, has resulted in compressed cap rates.

Nevertheless, compared with other property types, data centres currently offer one of the highest returns, with an average return of 15 percent in 2021, according to PGIM Real Estate. With rising interest rates putting a squeeze on asset yields, it is no wonder investors the world over are turning their attention from traditional real estate such as office space and sho

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