New York, NY — May 19, 2018 – Not all real estate is created equal as highlighted today in Barron’s. The article focuses on how data center real estate is providing one of the most compelling investment opportunities, not only in real estate, but also in technology. Data centers are experiencing tremendous rent and demand growth, have high barriers to entry, and are defensive in nature. Data Centers are at the heart of the Benchmark Data & Infrastructure Real Estate SCTRSM Index (SRVRSCTR). Just last week, the SRVR exchange traded fund launched on the NYSE Arca.
I’ve stated before that the internet and cloud computing has been an unimaginable boom for technology real estate (cell towers and data centers) but that we haven’t even scratched the surface of what is to come with the ‘Future Four Horsemen’
- Artificial Intelligence
- Virtual Reality
- Distributed Ledgers / Blockchain
The author, Evie Liu, interviewed a portfolio manager who emphasized the insatiable demand for data and in turn the property type:
“An autonomous car will need 40 times more bandwidth than the cars we use today,” says East. “The demand for data centers is growing 30% per year in the U.S. and 70% in China, but there are only six public companies in the supplier’s market.” They are: Equinix (EQIX), CoreSite Realty (COR), CyrusOne (CONE), Digital Realty Trust (DLR), QTS Realty Trust (QTS), and Switch (SWCH),” Barron’s
When Benchmark crafted the SRVR index we made sure that it comprised of all US listed companies that have exposure to the sector regardless of tax structure – REIT or C-Corp – and our index contains the data companies:
|DIGITAL REALTY TRUST||DLR|
|IRON MTN INC|
|INTERXION HOLDING N.V|
|GDS HLDGS LTD||GDS||NASDAQ||3.21%
|CORESITE REALTY CORP||COR||NYSE||3.00%
|QTS REALTY TRUST||QTS||NYSE||1.50%
|As of 5/19/2018||
One of the unique advantages of the sector is the moat around the business model:
“Data centers aren’t easy markets to enter. It’s not hard to purchase a piece of land to build the property, but the facility needs to be outfitted in fiber, equipped with interconnected networks, and wired for massive electric power and top-tier security devices.”
Other properties sharing the characteristics he likes include wireless towers (American Tower REIT (AMT), Crown Castle International (CCI), SBA Communications (SBAC), lab space, infrastructure facilities, toll bridges, and airports.
The sector is also a good hedge against inflation. “A lot of properties have CPI escalators built in the lease, so the return you get are real numbers but not nominal value.”
What else does the sector offer? Stability. “There’s no tech revolution and upheaval, no labor union, less regulations,” says East. “The ocean is always the same here.”
Furthermore, the Data & Infrastructure Index, SRVR, was created specifically to capture the returns of the proliferation of computing devices that permeates every aspect of our lives and as such contains the wireless towers mentioned above. American Tower accounts for 14.44%, Crown Castle accounts for 13.64%, and SBA Communications is 4.42% of the index.
The SRVR index provides a way of managing real estate exposure to companies that primarily are engaged in data storage and information management, data centers, fiber cables, wireless infrastructure, telecommunications towers, and diversified government solutions.
Benchmark’s SRVR Index is a cornerstone of eCommerce ecosystem and was launched in conjunction with the RTL and INDS indexes.