Data centers are in strong demand as technological advances emphasize cloud providers. These centers continue to look for cities with lower energy costs and available real estate, and have found Texas commercial real estate and land to be favorable.
According to D Magazine, data center demand is booming in North Texas. This is due, in part, to the city’s expenditure on its power grid. Downtown power lines are buried which causes less concern when large storms pass through. These types of businesses also have access to multiple power generation stations so that if one goes out, they have at least two backups. In addition, Dallas offers relatively low energy costs. Provision Data Services recently took over a 12-story building in downtown Dallas.
Dallas is said to be behind only one other location in terms of its data center market and that is northern Virginia. It’s hard to imagine, but they have even surpassed Silicon Valley. So what does a data center need and how can you cash in on this Texas commercial real estate investment strategy? A data center stores data and its power is measured in megawatts. The amount of storage they supply is based on the number of servers that they can run which is defined in terms of power. Why the sudden increase in data centers? Ironically, because of the Cloud.
Because of the increasing use of the Cloud, companies need what data centers provide—secure space. AllianceTexas, a private developer, is cashing in on this demand and is currently a strong contender as one of the top data center developers. The AllianceTexas data center contains a 150-acre Facebook data center that cost the mega social media star $1 billion. It is powered by a 200-megawatt wind farm and has additional acreage available for more data centers in the future.
Getting in on Data Centers
Data centers are a relatively new Texas commercial real estate investment strategy. Though they have been popular in the REIT sector for some time, they are now gaining attention with private equity and public institutional investors. According to the National Real Estate Investor, “Digital Bridge Holdings was formed in 2013 with more than $6 billion in equity and debt capital to invest in data centers.” In the REIT sector, the first quarter of 2017 showed a gain of 10.41 percent with data centers. In 2016, data center REITS posted a gain of 26.41 percent. As this sector grows, competition may end up being fierce in those parts of the country with lower cost energy sources.
Demand for smart Texas commercial real estate data centers is on the rise and so are merger and acquisitions. As those in the field become larger and more experienced, newcomers may find it difficult to penetrate the sector.
The Internet of Things continues to change the players and the structure. With data center REITs boasting an ROI in the 10 to 15 percent range, investors will continue to view these centers as strong investment opportunities. Pressure continues to find solutions for those that live and work outside hub markets. As promising new cloud technology emerges, major cloud providers will need to triple their infrastructure by 2020.
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About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.