Can data centres be considered a niche strategy anymore? If they can, it’s an increasingly-crowded nook for a property play.

Large investors such as private equity managers, and even larger investors such as sovereign wealth funds, are admiring the way the sector looks as it matures. The leading edge are already investing. That’s because the increasingly-long leases signed by cloud-computing companies and their kin are producing grown-up rental returns.

Asset values are rising as a result, however. The niche is controlled by a handful of major players, leaving it closely held. Cap rates on data centres are now compressing to rates comparable to core-plus real estate — unheard of for fringe assets.

Is a new sector already pricing itself out? Advocates say the data centre story has a long way to run yet, although it is also a story of money easily spent.

Look at the graph

Alternative real estate categories, such as data centres