Are Data Centers Immune to CRE Market Forces?

Originally posted on Commercial Property Executive

In this 2025 outlook, experts weigh in on the prospects for this increasingly popular asset class.

The National Security Memorandum on AI aims to accelerate AI development, supporting the next generation of supercomputers to come online. This could potentially unlock more incentives for developers, forge new partnerships and streamline processes for upgrading the energy grid that backs all these facilities.

Data centers have retained their competitive cap rates relative to the broader commercial real estate market, with fundamentals remaining strong throughout 2024 and suggesting even stronger performance going forward.

Construction across primary markets increased 70 percent—to nearly 3.9 gigawatts—in the first half of 2024, according to CBRE research. This, coupled with a record-low vacancy rate of 2.8 percent, shows the tremendous demand for IT capacity across the country. Nearly 80 percent of the 3,872 megawatts under construction are already preleased, CBRE Executive Managing Director for Data Center Solutions Pat Lynch underlined for Commercial Property Executive.

A growing share of this preleased capacity is directly tied to AI applications, but the majority remains cloud computing, which also plays a major role in developing new technologies. However, the race for AI has prompted more institutional investors to jump in this year, with a plethora of new massive data center investments from companies such as Prologis, Blackstone, BlackRock, Blue Owl Capital, Digital Realty, Equinix and many, many others.

It’s worth noting that most of these new investments are for developing new capacity. The AI-ready, hyperscale data center of the future will need more power, more space and more resilient infrastructure, which translates to more money being poured into the sector.

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