Private equity

Data centers

Diversify your portfolio and enhance potential for risk-adjusted returns by accessing an exciting sector experiencing unprecedented growth as a result of digital transformation and global demand for data.

Our capabilities

  • Experience: We have been investing in the sector since 2006 and have built strong relationships with key partners over this period.

  • Varied strategies: Build-and-lease to core strategy; Value-add acquisition of existing data centers; Development on a ready-to-fit or turnkey basis.

  • Knowledge: We have witnessed the asset class evolve and adapt, and our investment approach is focused on an understanding of where the most compelling opportunities exist in our markets.

  • Sustainability: Understanding of the unique development, operational, maintenance, security, and energy requirements specific to data centers, and long-term experience in responsible property investing.

  • Exposure: With investment teams in both the U.S. and Europe, we have a rounded view of the market and share our in-depth local market knowledge across the teams.

 

The opportunity around investing in data centers

Access diversification of your portfolio by investing in a rapidly growing sector driven by rising global data demand.

The opportunity for real estate investors

Interior photo of a data center

  • Resiliency and inflation protection: With growth and defensive attributes, the data center industry tends to be less vulnerable to short-term economic cycles.

  • Diversification: Low correlations to traditional assets and other real estate property types.

  • Strong risk/return profile: Long leases provide cash flow from high-quality credit tenants at higher yields than most property types; Resilient occupier market.

  • Continued demand: The essential role of data is a secular trend that will accelerate, making data centres increasingly important in a diversified portfolio.

These current views, opinions, and conclusions are subject to change. The conclusions of resiliency of the data center industry, low correlations and the positive cash income produced from data center properties are based on three years of higher income returns, lower average standard deviation and correlation as compared to other commercial real estate property types over the last 16 quarters ending 1Q 2023. Source: NPI and Principal Real Estate. There is no guarantee that such opportunities with the data center asset class will continue, and reliance upon this information is at the sole discretion of the reader.

Investment drivers

Image of screens displaying data

Data consumption

  • Society relies more and more on digital applications for work, education, transportation, entertainment, healthcare, and just about every other aspect of our modern lives.
  • We are creating and consuming massive amounts of data (three times as much in 2022 than just four years earlier).1
Interior photo of a data center

Data center demand

  • Processing, housing, streaming, and securing all this data has rapidly increased the demand for data centers.
  • Data center demand is at an all-time high and continues to rise, having grown 137% in the last year alone.2
Aerial photo of a data center

Limited supply/low vacancy

  • Data center supply is limited, and vacancy rates are very low.
  • Options to gain investment exposure to the data center sector are scarce due to limited offerings.
  • Given the highly specialized nature of the industry, experience is critical to successful execution.

Portfolio management

Principal Real Estate

Our experienced investment teams provide comprehensive, specialized, and sustainable capabilities across all four quadrants of commercial real estate—public equity, private equity, public debt, and private debt—and more recently, infrastructure investing. Whatever real estate strategy or combination of strategies you believe is right for your objectives, we can help.

United States
Managing Director, Portfolio Management
Casey Miller
25 years of experience
Managing Director, Portfolio Management
Jeff Menz
28 years of experience
Associate Portfolio Manager
Matt Hackman
17 years of experience
Europe
Director, European Data Centres
Paul Lewis
23 years of experience
Senior Fund Manager
Sebastian Dooley
8 years of experience
Learn more
 

Explore our featured insights.

Citations

1 IDC 2022.
2 datacenterHawk 4Q 2022.
Disclosure

Past performance does not guarantee future results.

Real estate investment options are subject to some risks inherent in real estate and real estate investment trusts (REITs), such as risks associated with general and local economic conditions. Investing in REITs involves special risks, including interest rate fluctuation, credit risks, and liquidity risks, including interest conditions on real estate values and occupancy rates. International and global investing involves greater risks such as currency fluctuations, political/social instability and differing accounting standards.

Investment guidelines are subject to change.

Not all investment options are available in all jurisdictions. Certain vehicles have not been registered with the United States Securities and Exchange Commission under the United States Securities Act of 1933 and may not be directly or indirectly offered or sold in the United States or to any United States person.

Principal Real Estate is a trade name of Principal Real Estate Investors, LLC, an affiliate of Principal Global Investors.