Data Center REITs, Stocks and ETFs: Investing in 2024 (2024)

Data Center Real Estate Investment Trusts (REITs), stocks, and Exchange-Traded Funds (ETFs) represent a significant intersection of technology and real estate investment, reflecting the growing demand for digital infrastructure. Although a few companies have garnered widespread recognition, the global landscape of data center REITs and stocks in 2024 is far more extensive than initially perceived, offering a broad spectrum of investment opportunities in the public markets.

In 2024, Data Center REITs, stocks, and ETFs include major organizations such as Equinix, Digital Realty, American Tower (owns CoreSite), Iron Mountain, Digital Core REIT, Keppel DC REIT, NEXTDC, GDS Holdings, SUNeVision, DigitalBridge, and the Global X Data Center REITs ETF, among many others.

Dgtl Infra explores the essential data center REITs, stocks, and ETFs, detailing their revenue streams, customer base, and the advantages and risks associated with investing in these assets. We provide an extensive list of data center REITs from the U.S. and Singapore, categorizing them from the largest to the best, and even highlighting those that have transitioned out of REIT status. Additionally, Dgtl Infra delivers a comprehensive overview of both REIT and non-REIT data center stocks, as well as ETFs that offer exposure to this sector.

What are Data Center REITs?

Data Center Real Estate Investment Trusts (REITs) are specialized companies that own and manage data centers, which are critical facilities equipped with servers, storage systems, switches, routers, and fiber optic transmission gear. Their primary function is to store, process, and manage digital data for various businesses and organizations.

The infrastructure of a data center includes the building shell, floor space, electrical equipment, cooling systems, fire suppression mechanisms, and physical security measures. Data center REITs are also known as data storage REITs or digital REITs.

Investing in data center REITs offers a unique opportunity to gain exposure to the underlying real estate that supports the rapidly growing sector of digital infrastructure, which is benefitting from the increasing demand for data storage and cloud computing services. Data center REITs attract a wide range of investors, including individuals and institutions like pension funds, insurance companies, mutual funds, hedge funds, and endowments.

Revenue Streams and Services of Data Center REITs

Data Center Real Estate Investment Trusts (REITs) primarily earn revenue through leasing space and power to tenants, referred to as rental revenue. This leasing can take two forms: colocation, where space is rented to multiple tenants, and dedicated leasing, where an entire facility is leased to a single tenant, typical of enterprise or hyperscale data centers.

Tenants use the leased space for their servers, storage systems, and networking equipment, facilitating data management and storage. The pricing models for data center leases generally fall into one of two categories:

1. Power Pricing: Charged in dollars per kilowatt ($/kW), this pricing model is based on the amount of power, measured in kilowatts, allocated to the tenant’s space or equipment
2. Space Pricing: Charged in dollars per square foot ($/sq ft), this model determines lease rates based on the physical space a tenant occupies within the data center

The contractual terms for actual power consumption may differ depending on the data center facility and its customers. In retail colocation setups, power costs are usually included in the pricing. However, in wholesale colocation and hyperscale configurations, power costs are often passed through directly to the tenant. Consequently, power revenue can form a significant part of a data center REIT’s operating revenue.

Additionally, data center REITs provide specialized services designed to meet their tenants’ specific needs. These services include cooling systems to regulate temperature and humidity and physical security measures to safeguard the premises. Typically, the costs for cooling and security services are included in the base lease rates for both $/kW and $/sq ft pricing models.

It is important to note that data center REITs generally do not provide the IT hardware (servers, storage systems, networking equipment) and software necessary for their tenants’ operations within the data center. Instead, their focus remains on offering real estate, infrastructure, and facilities management services.

Interconnection Services

Data center REITs that own facilities located at major network convergence points also offer interconnection services. These services facilitate the establishment of a physical network connection between two parties, allowing for the exchange of traffic and thus enhancing operational connectivity for customers.

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Interconnection services incur charges known as cross connect fees. These cross connects are typically billed as an additional, recurring monthly fee for each physical cable connection that links the customer’s equipment to other networks, services, or equipment within the data center. Generally, data center REITs derive about 10% to 20% of their total revenue from interconnection services.

Customers of Data Center REITs

Data center REITs serve a broad range of organizations, including:

• Cloud Service Providers (CSPs): Amazon Web Services (AWS), Microsoft Azure, Google Cloud
• Social Networking Platforms: Meta Platforms (formerly Facebook), TikTok
• Network Service Providers: AT&T, Verizon, Zayo, Cogent Communications
• Media and Content Companies: Netflix, Disney, Warner Bros Discovery, Activision Blizzard
• Software-as-a-Service (SaaS) Providers: Salesforce, Adobe, SAP, ServiceNow
• Managed Service Providers (MSPs): Rackspace, Dell, Kyndryl, Hewlett Packard Enterprise (HPE)
• Large Enterprises: Walmart, J.P. Morgan, McDonald’s, Exxon, UnitedHealth

Data center REITs typically enter into long-term lease agreements with their tenants, generally ranging from 3 to 5 years for retail colocation customers and 5 to 20 years for wholesale colocation and hyperscale clients. Historically, data center REITs have maintained high occupancy levels, around 80% across their total portfolio.

List of Data Center REITs

Data Center Real Estate Investment Trusts (REITs) are jurisdiction-dependent entities, with their structure, regulatory compliance, tax obligations, and investor benefits being governed by the specific laws and regulations of the country in which they are established. The United States and Singapore are the two major financial markets where data center REITs are both established and operational.

U.S. Data Center REITs

U.S. data center Real Estate Investment Trusts (REITs) are subject to regulations set by the Securities and Exchange Commission (SEC) and must fulfill specific Internal Revenue Service (IRS) criteria to maintain their REIT status. These requirements ensure that the data center REITs focus primarily on real estate investment, income generation, and shareholder returns. Specifically:

• Asset Allocation: They must allocate at least 75% of their total assets to real estate investments
• Income Source: At least 75% of their gross income must come from real estate-related sources, such as rents from real property or interest on mortgages financing real property
• Income Distribution: They are required to distribute at least 90% of their taxable income to shareholders annually in the form of dividends

Below are notable examples of major U.S. data center REITs:

1. Equinix (NASDAQ: EQIX): Has an international network with 260 data centers in 71 metropolitan areas, comprising 362,500 cabinets of power capacity and spanning 31.5 million square feet
2. Digital Realty (NYSE: DLR): Operates 309 data centers worldwide, offering 2,511 megawatts of IT load capacity in white space and 39.7 million net rentable square feet
3. American Tower (NYSE: AMT): Through its CoreSite division, owns 28 data centers providing 253.1 megawatts of power capacity across 3.62 million net rentable square feet
4. Iron Mountain (NYSE: IRM): Operates 24 data centers in 21 markets across the United States, Europe, and Asia, offering a total of 225.2 megawatts of power capacity and covering 3.4 million square feet
5. COPT Defense Properties (NYSE: CDP): Owns 30 powered shell data centers – 6 directly and 24 through joint ventures – totaling 5.7 million square feet. These facilities are predominantly leased to Amazon Web Services (AWS) in the Northern Virginia area
6. Blackstone Real Estate Income Trust (BREIT): A non-listed, perpetual life REIT holding interests in 97 data center properties, including a 35.7% ownership stake in QTS Data Centers with 83 properties. Additionally, BREIT controls three powered shell portfolios in Northern Virginia, contributing an additional 14 data center properties to its portfolio

Singapore Data Center REITs

Singapore Real Estate Investment Trusts (SREITs) are subject to regulation by the Monetary Authority of Singapore (MAS). For a company to be classified as an SREIT, it must primarily invest in income-generating real estate, distribute at least 90% of its taxable income to shareholders annually, and maintain a leverage limit of 50% of its total asset value.

This regulatory framework covers owners of data centers, which fall into two categories: dedicated data center REITs and industrial REITs that have significant exposure to data centers within their investment portfolios.

Below are notable examples of major Singapore-based data center REITs:

1. Digital Core REIT (SGX: DCRU): Owns a portfolio of data centers with interests in 12 facilities that span 1.2 million square feet. These facilities are located across the United States, Canada, Germany, and Japan
2. Keppel DC REIT (SGX: AJBU): Operates a portfolio of 23 data center properties, totaling nearly 3.1 million square feet. These properties are distributed across several key global markets, including Singapore, Australia, China, Malaysia, Germany, Ireland, Italy, the Netherlands, and the UK
3. Mapletree Industrial Trust (SGX: ME8U): Has a portfolio of over 60 data centers, with a significant presence in North America – 56 facilities totaling 8.3 million square feet of net lettable area (NLA) are located in the United States and Canada. The portfolio also extends to Singapore and Japan
4. CapitaLand Ascendas REIT (SGX: A17U): Holds 15 data centers in its portfolio, which are located in Europe (specifically, the UK, France, the Netherlands, and Switzerland) and Singapore. Together, these facilities provide over 2.1 million square feet of Gross Floor Area (GFA)

Although these data center REITs are listed on the Singapore Exchange (SGX), a significant share of their data center assets are located outside of Singapore, predominantly in the United States and Europe.

Largest Data Center REITs

The ranking of the largest data center Real Estate Investment Trusts (REITs) varies depending on the metrics used, leading to different leaders in each category:

• Revenue: Equinix stands out as the largest by revenue, having generated $8.2 billion in full-year 2023
• Market Capitalization: Equinix also leads in market capitalization, valued at over $80 billion
• Number of Data Centers: Digital Realty tops the list as the largest data center REIT, with a global presence of 309 operational facilities

It is important to note that while American Tower generates more overall revenue and has a higher market capitalization compared to Equinix, its data center segment (principally CoreSite) is significantly smaller. This segment has generated just over $800 million in operating revenue over the past 12 months and was recently valued at around $10 billion.

Best Data Center REITs

Determining the “best” data center REIT (Real Estate Investment Trust) involves using a valuation multiple as a benchmark. A higher valuation multiple suggests that investors expect the REIT to achieve higher future earnings growth. This, in turn, implies that the REIT might be considered a more promising or superior investment relative to others with lower multiples.

On both an EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization) and Price/AFFO (Adjusted Funds From Operations) valuation basis, Equinix emerges as the leading data center REIT. It trades at approximately 23 times its estimated 2024 EBITDA and 24.5 times its estimated 2024 AFFO.

Additionally, Equinix has historically maintained a valuation multiple premium of about 1x to 3x over its closest competitor, Digital Realty, further reinforcing its position at the top.

Former Data Center REITs

In the United States, certain data center companies that were initially established as Real Estate Investment Trusts (REITs) have transitioned away from the REIT structure. This shift was influenced by either a change in ownership or strategic decisions.

Examples of these previously classified data center REITs include:

• CyrusOne: Acquired in 2022 by KKR and Global Infrastructure Partners (GIP), this transaction valued the former data center REIT at approximately $15 billion. Following the acquisition, CyrusOne was delisted from the NASDAQ stock exchange
• QTS Realty Trust: In 2021, QTS was taken private by funds managed by Blackstone in a deal valuing the former data center REIT at around $10 billion. Consequently, QTS was delisted from the New York Stock Exchange (NYSE)
• DigitalBridge (NYSE: DBRG): The former data center REIT, which holds minority interests in DataBank and Vantage SDC, transitioned from its prior REIT structure to operate as a taxable C corporation starting at the beginning of 2022

Advantages and Risks of Data Center REITs

Data Center Real Estate Investment Trusts (REITs) offer promising growth opportunities alongside inherent risks that data center investors should consider.

Advantages of Investing in Data Center REITs

Data Center REITs provide an attractive investment opportunity for those seeking to leverage the sector’s high growth potential, stable cash flows, and strong tenant retention.

Here’s a closer look at the benefits of investing in data center REITs:

1. High Growth Potential

According to IDC forecasts, global data generation is expected to increase at a compound annual growth rate of 22% to reach 291 zettabytes by 2027. This surge is fueled by advancements in cloud computing, the Internet of Things (IoT), and artificial intelligence (AI), driving the demand for data center services. Consequently, Data Center REITs stand to gain from this theme as the digital technology reliance of businesses intensifies, leading to higher occupancy rates and rental incomes.

2. Stable Cash Flows

Data Center REITs typically enter into long-term lease agreements with their tenants, ranging from 3 to 5 years for retail colocation customers, to 5 to 20 years for wholesale and hyperscale tenants. These agreements provide a reliable and predictable revenue stream. Additionally, data center leases typically include annual rent escalations of 2% to 3% in the U.S. (or adjustments based on the Consumer Price Index in international markets), leading to gradual income growth over time.

3. Tenant Retention Strength

The specialized nature of data centers, combined with the high switching cost and operational complexity of relocating IT equipment and telecommunications networks, encourages high lease renewal rates. This tendency is particularly strong for data center REITs that own carrier neutral colocation data centers focusing on connectivity, such as carrier hotels, due to the unique interconnection services they offer.

Risks of Investing in Data Center REITs

Investing in data center Real Estate Investment Trusts (REITs) comes with unique challenges and risks that potential investors should carefully consider. These include technology and infrastructure obsolescence, rising energy costs and limited power availability, and customer concentration.

Here’s a closer look at the risks of investing in data center REITs:

1. Technology and Infrastructure Obsolescence

Data centers must upgrade their power equipment and cooling systems to support the evolving technological needs of their customers, in the form of servers and storage systems, driven by the growing demand for data processing and storage. As an example, the advent of power-intensive generative AI applications requires:

• Increased Facility Power Capacity: Future data centers may need to support up to 200 megawatts (MW) per facility, a significant jump from the current 50 MW, within the same physical space. This increase leads to greater power density within a data center footprint
• Higher Power Density per Rack: The power density required per rack is expected to rise from less than 10 kW to over 40 kW, due to the intense energy demands of GPUs for AI model training

These upgrades require substantial ongoing investment from data center REITs. Data centers failing to adapt to new technologies like generative AI risk becoming obsolete, resulting in lower occupancy rates and revenue.

2. Energy Costs and Power Availability

Data centers are significant energy consumers, accounting for nearly 2% of global electricity demand, or 460 terawatt-hours (TWh) annually, a figure projected to exceed 1,000 TWh by 2026 according to the International Energy Agency (IEA). This energy primarily powers servers and cooling systems. Rising energy prices can drastically affect the operating expenses and profitability of data center REITs.

Power availability poses another critical challenge. Limitations on the generation, transmission, and distribution of electricity by utility companies can restrict a data center’s ability to secure enough power for future expansions, thus impeding growth. This issue is prevalent in the United States, notably in major data center hubs such as Northern Virginia, served by Dominion Energy, and Santa Clara, where Silicon Valley Power (SVP) operates.

3. Customer Concentration

Data center REITs often depend on a small number of very large customers, especially those companies focusing on hyperscale data centers. For instance, Digital Realty’s top 20 customers account for about 50% of its total annualized recurring revenue. This reliance introduces risk; significant changes like a major tenant moving, downsizing, or deciding to construct its own facilities can have substantial impacts. Major hyperscale customers such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud, Oracle Cloud, Meta Platforms (formerly Facebook), Apple, and TikTok wield significant bargaining power, underscoring this concentration risk.

How to Invest in Data Center REITs

Investing in data center Real Estate Investment Trusts (REITs) means acquiring shares in companies that own and manage data center facilities. Investors looking to invest in this sector can purchase these shares either directly on stock exchanges or indirectly through Exchange-Traded Funds (ETFs) and mutual funds.

Below, we detail specific examples of both data center stocks and ETFs, providing a clearer understanding of how and where to invest in this sector.

Data Center Stocks

Data center stocks represent equity interests in publicly traded companies that are involved in the ownership and operation of data centers. A significant number of these data center stocks are structured as Real Estate Investment Trusts (REITs). However, it is crucial to understand that not every data center stock falls under the REIT category.

There are also companies, specifically C Corporations, that own and operate data centers without adhering to the REIT structure. Below we highlight both REIT and non-REIT data center stocks from around the world, broadening the scope beyond the more well-known data center REIT stocks.

REIT Data Center Stocks

Data center REIT stocks are publicly traded companies structured as Real Estate Investment Trusts (REITs), primarily focusing on the ownership and operation of data centers.

1. Equinix (NASDAQ: EQIX)
2. Digital Realty (NYSE: DLR)
3. American Tower (NYSE: AMT)
4. Iron Mountain (NYSE: IRM)
5. COPT Defense Properties (NYSE: CDP)
6. Digital Core REIT (SGX: DCRU)
7. Keppel DC REIT (SGX: AJBU)
8. Mapletree Industrial Trust (SGX: ME8U)
9. CapitaLand Ascendas REIT (SGX: A17U)

Among these stocks, Equinix, Digital Realty, Digital Core REIT, and Keppel DC REIT are considered “pure play” data center stocks. These companies concentrate exclusively on data center operations, offering investors direct exposure to the data center market. The remaining entities, while also involved in data center operations, diversify their business by engaging in other sectors such as operating cell towers, industrial property ownership, and physical records storage.

Non-REIT Data Center Stocks

Publicly traded companies that own and operate data centers but do not follow the REIT structure can be classified as non-REITs. It is common for these companies to have most of their underlying data center assets physically located outside the United States, in countries such as Australia and China.

Australia

• NEXTDC (ASX: NXT): Operates 13 data centers across major Australian markets including Sydney, Melbourne, Perth, Brisbane, Canberra, and the Sunshine Coast, with a total power capacity of 133.4 megawatts
• Macquarie Technology Group (ASX:MAQ): Through its subsidiary, Macquarie Data Centres, it operates five data centers in Sydney and Canberra, offering a total of 63 megawatts of power capacity
• Global Data Centre Group (ASX: GDC): Holds interests in 19 data centers, including facilities operated by Etix Everywhere, a purpose-built facility leased to Fujitsu, and a minority stake in AirTrunk, a data center operator in the Asia-Pacific region

China and Hong Kong

• GDS Holdings (NASDAQ: GDS): The largest carrier-neutral data center operator in China, managing over 100 data centers spanning 554,210 square meters (5.97 million square feet) in key markets such as Greater Beijing (Beijing-Tianjin-Hebei), Greater Shanghai (Yangtze River Delta), and the Greater Bay Area
• VNET Group (NASDAQ: VNET): The second largest carrier-neutral data center operator in China, managing 45 self-built data centers and 98 partnered data centers, offering an aggregate capacity of 87,322 cabinets across over 30 cities in China
• Beijing Sinnet (300383:CH): Operates a network of more than 10 data centers in various locations across China, including Yizhuang, Fangshan, Yanjiao, Jiuxianqiao, Yizhuangkexin, Shanghai, and Zhongjin
• Shanghai AtHub (603881:CH): Manages 35 data centers in seven key Chinese markets, encompassing the Beijing-Tianjin-Hebei region, the Yangtze River Delta region, and the Guangdong-Hong Kong-Macao Greater Bay Area
• SUNeVision (1686:HK): Operates seven data centers in Hong Kong under the iAdvantage brand, providing a total of 100 megawatts of power capacity and 1.7 million square feet of Gross Floor Area (GFA)

Rest of World

• DigitalBridge (NYSE: DBRG): Holds minority interests in two data center operators: DataBank and Vantage SDC. Combined, these companies manage 78 data centers, comprising over 2.35 million square feet of critical IT infrastructure, primarily located within the United States
• DCI Indonesia (IDX: DCII): Operates three data center campuses with 64 megawatts of capacity, making DCI the largest colocation data center provider in Indonesia
• MEEZA (QSE: MEZA): Manages 5 data centers (M-Vaults) in Qatar with 24.4 megawatts of total capacity, accounting for roughly half of the total data center capacity available in the Qatari market

Best Data Center Stocks

The performance of a stock’s price over the previous year can serve as a valuable indicator for identifying the “best” data center stocks. This metric reflects the collective assessment of investors regarding a company’s financial stability and its potential for future growth. Utilizing this criterion, here are the five leading data center stocks, arranged in descending order of their performance over the past 12 months:

1. NEXTDC (ASX: NXT)
2. DigitalBridge (NYSE: DBRG)
3. Iron Mountain (NYSE: IRM)
4. Digital Realty (NYSE: DLR)
5. Macquarie Technology Group (ASX:MAQ)

Formerly Publicly Traded Data Center Stocks

The following list details data center companies that transitioned from being publicly traded stocks to privately-held entities.

• CyrusOne: Purchased in 2022 by KKR and Global Infrastructure Partners (GIP), this transaction valued the former data center stock at approximately $15 billion. Following the acquisition, CyrusOne was delisted from the NASDAQ stock exchange
• QTS Realty Trust: In 2021, QTS was acquired by funds managed by Blackstone in a deal valuing the former data center stock at around $10 billion. Consequently, QTS was delisted from the New York Stock Exchange (NYSE)
• Switch Inc: In 2022, Switch Inc was acquired by DigitalBridge and IFM Investors in a deal valued at around $11 billion. Following the acquisition, Switch was delisted from the New York Stock Exchange (NYSE) and became a private company
• Cyxtera Technologies: In 2024, Brookfield Infrastructure’s Evoque Data Center Solutions acquired the majority of Cyxtera’s assets, including 40 data centers, out of Cyxtera’s Chapter 11 bankruptcy process through a $775 million transaction. Consequently, Cyxtera ceased to be a publicly traded company
• Chindata Group: Acquired by Bain Capital in 2023 in a transaction that valued the company at approximately $4 billion. This acquisition led to Chindata being delisted from the NASDAQ stock exchange

Data Center ETFs

Exchange-Traded Funds (ETFs) specializing in data center stocks predominantly invest in publicly traded data center Real Estate Investment Trusts (REITs). These ETFs offer a way to diversify an investment portfolio with a relatively low capital requirement.

The following are the most prominent ETFs in the data center sector:

Global X Data Center REITs & Digital Infrastructure ETF

The Global X Data Center REITs & Digital Infrastructure ETF (NASDAQ: VPN) is dedicated solely to investing in data centers, cellular towers, and digital infrastructure. This “pure play” ETF primarily invests in the Solactive Data Center REITs & Digital Infrastructure Index and related ADRs/GDRs. Key metrics of the VPN ETF include:

• Top 5 Holdings: Equinix, American Tower, Crown Castle, Digital Realty, DigitalBridge
• Expense Ratio: 0.50%
• Performance History: 11.3% total return over the past year
• Assets Under Management (AUM): $55 million
• Liquidity: $600,000 average daily dollar volume

Pacer Data & Infrastructure Real Estate ETF

The Pacer Data & Infrastructure Real Estate ETF (NYSEARCA: SRVR) follows a passive management approach, replicating the performance of the Solactive GPR Data & Infrastructure Real Estate Index. This index includes companies in developed markets that generate at least 85% of their revenue from real estate operations in the data and infrastructure sectors. Key metrics of the SRVR ETF include:

• Top 5 Holdings: Equinix, American Tower, Crown Castle, China Tower, NEXTDC
• Expense Ratio: 0.55%
• Performance History: -5.17% total return over the past year
• Assets Under Management (AUM): $500 million
• Liquidity: $2.7 million average daily dollar volume

The iShares Cohen & Steers REIT ETF (BATS: ICF) invests in large, liquid REITs and similar assets to capitalize on the growth potential of the U.S. real estate industry. Unlike the previously mentioned ETFs, it maintains a non-diversified portfolio that is not exclusively focused on data centers and digital infrastructure. Key metrics of the ICF ETF include:

• Top 5 Holdings: Prologis, Equinix, American Tower, Welltower, Crown Castle
• Expense Ratio: 0.33%
• Performance History: -1.69% total return over the past year
• Assets Under Management (AUM): $2 billion
• Liquidity: $11.2 million average daily dollar volume