Is The Data Center The Next Best Investment Asset Class?

With more than 2.5 exabytes – that is, 2.5 billion gigabytes (GB) – of data generated each day worldwide in the form of emails, documents, presentations, images, videos and voice recordings, data centers are increasingly becoming a necessity in today’s business environment, as they serve as the backbone of systems that facilitate the swift transmission of this data 24/7.

In Asia Pacific, Singapore has emerged at the forefront of this rising trend, according to Cushman & Wakefield’s Data Center Risk Index, which identifies the top risks likely to affect data center business operations.

As the city-state continues to lead some of its large neighbors in the region in a race to the top of data center location rankings, Cushman & Wakefield estimates that data center occupancy rates will reach 70% by the end of 2018. Data centers typically have higher capitalization rates (cap rates) than traditional asset classes such as office, retail, hospitality and residential. In the current low interest rate environment, the spread between the interest rate and the cap rate is large enough to continue to attract investors into the data center business.

With Singapore emerging as the most robust market out of 10 Asian countries in terms of business operations for data centers, does this mean the data center sector in Singapore is the next best investment asset class? What are the barriers to entry, and what should an investor look out for in such an offering? Find out more in our latest research report on data centers here.

Christine Li is the Head of Research for Cushman & Wakefield Singapore. 

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