Commercial real estate professionals are becoming more and more aware of the investment potential of data centers. This is especially true because of obvious growing demands in the worlds of cloud computing, data storage and the maturing digital economy. With the frantic rush to data centers in the commercial real estate world an analogy comes to mind: could data centers be the commercial real estate investment gold rush?
Data Centers are Attractive Investment Opportunities
These days there is a near-constant growing demand for data. These demands are supported by cloud services as well as AI and the overall digitalization of almost everything our lives touch. Like it or not, data centers have become essential in both our personal and professional lives.
As big tech companies like Google and Amazon expand, so will their needs for data storage. This presents investment opportunities across the board, especially when it comes to the commercial real estate market. Underutilized commercial spaces or real estate can be transformed into brick-and-mortar data centers. To the point, while the data lives in the cloud, the cloud must live somewhere on the ground. Therefore, the demand for these physical spaces is on the rise and will likely always be there for the indefinite future.
Challenges to Creating a Data Center
“When everybody is digging for gold, it’s good to be in the pick and shovel business.” This quote attributed to Mark Twain details how perilous these speculative booms can be. One might think that setting up a server farm in commercial space wouldn’t require much attention. After all, there will be no real need for offices or cubicles or anything that might be typically required by way of a standard tenant contract. However, a few challenges must first be overcome before a commercial real estate space can be converted into a profitable data center.
As you can imagine, data centers are power hungry. The building infrastructure must be able to draw power and then sustain that power 24/7. This would likely call for backup generators or industrial batteries.
It’s also likely that a commercial space would need to be fitted with environmental control systems. A single server can generate a lot of heat. Hundreds of servers can create a heat wave. Heat and electronics are not compatible.
Therefore, air handling systems will likely be required. These air handling units would be tasked with maintaining a very specific temperature so that the servers can operate under optimal conditions. As you might expect, these systems will be expensive. They will also require a good deal of power to operate and may be most economical in cooler climates.
In fact, according to the International Energy Agency data centers and transmission networks contribute to about 1% of energy-related greenhouse gas emissions. This means that data centers are beginning to draw some unwanted attention from energy conservationists. As a result, there is a building pressure for data center owners and operators to transition to renewable energy sources.
Is a Data Center the Right Choice for Your CRE Investment
Converting your available commercial real estate property into a data center could present a very lucrative opportunity for you and your business. There is a clear and obvious demand for the space. However, tech companies will require the assurances of considerable power and, possibly, a few out-of-pocket infrastructure upgrades. As the saying goes, “You have to spend money to make money,” and that may very well be the case when it comes to transforming your commercial property into a data crunching space.
If you are looking to expand your reach into data centers, you will need to juggle commercial leases and for that, Quarem’s own cloud-based software should be your solution. Schedule a free demo today.
