Data Centers as a Real Estate Investment

Asset Class Data Centers: What Opportunities Are Emerging?

In today’s increasingly digital world, data centers have become an indispensable part of global infrastructure. Driven by the exponential growth of technologies such as cloud computing, artificial intelligence (AI), and the Internet of Things (IoT), the demand for data processing and storage has risen dramatically. This development has not only fueled a sharp increase in demand for data centers but also created a significant investment opportunity for real estate investors.

Data Centers as an Attractive Investment Opportunity

Data centers are among the most dynamic and fastest-growing asset classes in the real estate sector.
In February, Microsoft announced plans to build three hyperscale data centers in the Lower Rhine cities of Bedburg, Bergheim, and Elsdorf, with an investment of up to three billion euros. This is just one example of a booming market driven by the rising demand for computing and storage capacity.

Many locations across Germany are benefiting from this boom. Cities such as Frankfurt am Main—which hosts the world’s largest internet exchange with over 60 data centers—as well as Berlin, Munich, Düsseldorf, Hamburg, and increasingly smaller cities like Offenbach and Magdeburg are experiencing growth. Even rural regions such as Falkenstein in the Vogtland area are seeing a rise in data center development.

Rising Demand and Excellent Growth Prospects

For real estate investors, data centers represent an attractive sub-asset class within the core investment segment. These specialized properties can house server areas of up to 100,000 square meters and offer several key advantages:

• High value creation per square meter:
  Located primarily in commercial zones, data centers generate significant land and transaction value through high floor-space turnover.

• Long-term leases and stable income:
  Lease agreements for data centers are typically straightforward to manage and offer stable, long-term cash flows with minimal administrative effort.

• Attraction of suppliers and related industries:
  Data centers often attract additional businesses to the surrounding area, further increasing the location’s appeal.

Risks and Challenges

Despite their compelling potential, data center investments come with certain risks and challenges that must be taken into account:

• Concentration risk and limited alternative use:
  Due to their highly specialized nature, data centers are difficult to repurpose for other uses. However, the ongoing digitalization trend and growing demand for computing services significantly mitigate this risk.

• High energy consumption:
  Data centers require vast amounts of energy, particularly for server operation and cooling. Currently, Germany’s approximately 3,000 large-scale data centers consume around 18 terawatt-hours (TWh) annually—roughly 3% of the country’s total electricity usage. This figure is expected to double to 35 TWh by 2030.

Sustainability and Climate Responsibility

Increasing climate protection regulations pose an additional challenge for the industry. The German government aims for data centers to be climate-neutral by 2027. Achieving this goal will require the use of 100% renewable energy and efficient reuse of the heat generated during data processing.

At present, only around 5% of data centers recover more than half of their waste heat—due to factors like insufficient temperature levels, high investment costs, and limited economic feasibility. To increase acceptance and sustainability, Aengevelt Research recommends integrating energy infrastructure planning from the very beginning.

International examples show this can work: In Stockholm, heat from data centers already accounts for 10% of the entire municipal district heating network.

Financing Options for Data Centers

Financing data centers poses unique challenges, given their high specialization and capital intensity. Financing without equity is usually not possible. While traditional bank loans remain relevant, increasingly customized financing models are emerging to address the asset class’s specific demands.

Investors can draw on various funding sources, including:

• Joint ventures with institutional investors

• REITs (Real Estate Investment Trusts)

• Infrastructure funds specializing in data assets

• Alternative financing such as private equity and crowdfunding

It is critical to establish a solid financial foundation from the outset and incorporate ESG criteria (Environmental, Social, Governance) to secure long-term, sustainable returns.

Choosing the right financing strategy for a commercial real estate project like this can make the difference between a successful and high-risk investment. Engaging early with experts and financial advisors is essential for creating the optimal project structure.

A Future-Proof Investment in Digital Infrastructure

Data centers represent a forward-looking asset class for professional investors with both economic and societal relevance. As digitalization advances globally and the need for data processing capacity grows, data centers will continue to play a pivotal role.

Investors who position themselves early in this specialized market can benefit from long-term, stable returns—provided they account for sustainability and meet rising energy efficiency standards.

With the right planning and integration of renewable energy sources, data centers can be operated not only profitably, but also in an environmentally responsible manner. This makes them one of the most promising and future-proof investment opportunities in the real estate sector.