Kevin O’Leary has recently noted the increasing demand for data centers, describing them as a notable combination of real estate and technology with considerable potential.
“The demand is off the charts,” O’Leary said in a video about the future of AI and tech infrastructure. “If I were 25 today, I'd focus on two massive opportunities: AI implementation and data center development.”
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What Are Data Centers and Why Are They Booming?
Data centers are the backbone of today's digital world. They store and handle huge amounts of information used for things like social media and AI tools. As more people and businesses rely on cloud services, smart technology and the Internet of Things (IoT), the need for data centers has grown fast.
When it comes to real estate, people usually think about homes, offices or stores, but data centers are different and bring something new to the table. They mix the steady nature of real estate with the fast growth of technology.
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O’Leary explains that data centers are more than just places to rent out. They also have special systems to keep things cool, constant power supplies and security to protect important information. They are key for running AI programs, which need much computer power and storage space.
“Real estate meets tech in the most lucrative way. This is where the future's heading,” O’Leary said. “Don't miss it.”
The Shift to Multistory Data Centers
Traditionally, data centers have been sprawling, single-story buildings in remote areas. However, the industry is going vertical with land prices soaring in prime markets and the need for more capacity. Multistory data centers are now being built in urban and suburban areas, blending high-tech infrastructure with efficient land use.
“Data-center footprints are continuing to expand and if you can’t go outward, sometimes you have to go upward,” said Steven Donohoe, a senior executive at Equinix EQIX, a leading data center operator. These vertical designs allow data center operators to maximize their return on investment while meeting the growing demand for AI and cloud services.
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Opportunities for Investors
There is an endless demand for data centers. According to O’Leary, only five significant data centers are currently being built in the United States, although the market requires at least 30 to meet demand.
For investors, this gap spells opportunity. Data center real estate investment trusts (REITs) like Digital Realty Trust and Equinix lead the charge, offering ways to invest in this growing market. There are also private projects for building data centers that are catching the interest of people looking to start at the beginning.
A Lifeline for Struggling Commercial Properties?
Another potential lifeline for faltering commercial real estate could be the emergence of multistory data centers. Many suburban office buildings that aren’t being used could be converted into data centers, giving developers and landlords a new source of income. While not every office building can make the cut, the potential for repurposing these spaces adds another layer of opportunity in the real estate market.
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