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5 Data Center REITs to Invest in 2024

5 Data Center REITs to Invest in 2023
Bogdan Stojkov

Summary: Data center REITs are specialized real estate investment vehicles that offer you an opportunity to invest in the booming digital economy. The most convenient way to invest in data center REITs is through a reputable brokerage platform, such as eToro.

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  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10.

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eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

About Data Center REITs

Real estate investment trusts (REITs) are companies that own, operate, or finance income-producing real estate properties. These properties can include apartment complexes, shopping malls, office buildings, and, in this case, data centers.

Data Center REITs specifically focus on owning and managing data center facilities. They represent critical infrastructure that houses servers, storage systems, and networking equipment. As such, various companies rely on data centers to store and process vast amounts of data, ensuring the smooth operation of their online services.

Investing in REITs that deal with data centers allows you to indirectly invest in the data center industry, as these trusts own and operate such properties. They generate revenue by leasing space within these facilities to technology companies, cloud service providers, and other organizations that require secure and reliable data storage and processing capabilities.

Top 5 Data Center REITs

When it comes to investing in Data Center REITs, we have come up with our top 5 picks based on thorough research. These include:

Digital Realty Trust Inc

Digital Realty is a prominent REIT specializing in data center and colocation solutions. As a global leader, DLR owns and manages a vast network of data centers across strategic locations, providing essential infrastructure for tech companies and enterprises worldwide.


Equinix Inc

Equinix is a leading global data center and interconnection company, known for its extensive network of data centers that facilitate the secure and efficient exchange of data between businesses. It plays a pivotal role in connecting companies to cloud service providers and supporting digital transformation efforts.


American Tower Corp

American Tower is a REIT focused on owning and operating a vast portfolio of wireless and broadcast communication towers globally. Its infrastructure supports the telecommunications industry by providing critical infrastructure for wireless communication networks.


BlackStone Group LP

BlackStone Group is another global investment firm offering a wide range of financial services, including private equity, real estate (including data center REITs), hedge funds, and credit. It’s known for its significant presence in alternative investments and asset management.


Macquarie Group Limited

Macquarie Group is an Australian multinational financial services company that operates across various segments, including banking, financial advisory, asset management, and commodities trading. The company is renowned for its global presence and expertise in infrastructure and real assets investments, such as data center REITs.


Why invest in Data Center REITs?

Some of the main reasons why many investors consider Data Center REITs as solid investment choices include:

  • Digital transformation: As businesses shift their operations online, the need for data storage and processing capacity continues to grow. This trend, therefore, creates a strong and consistent demand for data center facilities;
  • Stable income: Data Center REITs typically generate stable and predictable rental income from long-term leases with their tenants. These leases often include escalations that can lead to income growth over time, making them a reliable source of dividends for investors;
  • Diversification: Investing in Data Center REITs can provide diversification to your investment portfolio. They offer exposure to the technology sector, which can perform differently from other industries during economic cycles. This diversification can help spread risk and potentially improve overall portfolio performance;
  • Competitive yields: Many Data Center REITs offer attractive dividend yields compared to traditional income-producing investments like bonds or savings accounts. These dividends can provide a consistent stream of income for investors;
  • Capital appreciation: In addition to the steady income, Data Center REITs can also experience capital appreciation as the value of their real estate properties increases over time. This can potentially lead to capital gains for investors.

How to invest in Data Center REITs: Step-by-step

Investing in Data Center REITs is relatively straightforward. Hence, if you’re interested, you can follow this simple step-by-step guide:

Step 1: Choose a brokerage account

To invest in Data Center REITs, you’ll first need a brokerage account. There are numerous out there, so it’s key to choose one that suits your investment strategy the best. You should, therefore, consider fees, REIT availability, user interface, and whether the broker is licensed.

In this case, our go-to broker for Data Center REITs is eToro. This is a widely popular brokerage platform with over 30 million investor accounts. It’s also licensed by regulatory authorities like FinCEN, and it offers a host of solid features, including:

  • Commission-free stock trading;
  • Access to over 2,000 stocks from 17 different exchanges;
  • The option to purchase fractional shares;
  • A user-friendly platform that simplifies the trading experience.

Highly Rated Stock Trading & Investing Platform

  • Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10.

  • Copy top-performing traders in real time, automatically.

  • Regulated by financial authorities including FCA and FINRA.

2.8 Million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

Before making any investment, it’s key to research the Data Center REITs you’re interested in. You should look at their financial performance, portfolio of properties, dividend history, and management team. Consider factors such as location, tenant quality, and lease terms.

Step 2: Fund your account

Once you open an account on a reputable brokerage platform, you’ll need to fund it before you can invest in your desired Data Center REIT. To do so, you should:

  • Link your bank account: Link your brokerage account with your bank account. This will allow you to transfer funds more easily;
  • Transfer money: Initiate a transfer from your bank account to your brokerage account. Once the transfer is complete, the funds will be available for trading.

Step 3: Place your order

With your account funded, and your eyes set on certain Data Center REITs, you should place buy orders for their shares through your brokerage account. While doing so, note that you should specify the number of shares or the dollar amount you wish to invest.

Based on your research, select the Data Center REITs that align with your investment goals and risk tolerance. Diversifying your investment by choosing multiple REITs can help spread risk.

Step 4: Monitor your investment

After investing in Data Center REITs, it’s essential to keep an eye on your portfolio. So, monitor the performance of your investments, stay informed about industry trends, and adjust your portfolio as needed to meet your financial goals.

If you’re an investor based in Canada, and you’re looking to buy REITs, feel free to check out our comprehensive How to Invest in REITs in Canada guide.

Pros and cons of investing in Data Center REITs

Pros

Pros

  • Steady income: Data Center REITs typically distribute a significant portion of their income as dividends to shareholders;
  • Potential for capital appreciation: As the demand for data center services continues to grow, the value of data center properties may appreciate over time;
  • Diversification: Data Center REITs provide diversification within the real estate sector and exposure to the technology industry, reducing the risk associated with having a concentrated investment portfolio;
  • Professional management: Data Center REITs are managed by experienced real estate professionals who oversee property operations and tenant relationships, ensuring efficient management and maintenance.
Cons

Cons

  • Interest rate sensitivity: Like many income-oriented investments, Data Center REITs can be sensitive to changes in interest rates;
  • Economic downturns: A recession or economic slowdown may lead to lower occupancy rates and reduced rental income for Data Center REITs;
  • Competition: The data center industry is competitive, and the success of Data Center REITs depends on their ability to attract and retain high-quality tenants;
  • Technological advances: Rapid technological advancements may make older data center facilities less attractive to tenants.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

FAQs about Data Center REITs investing

How do Data Center REITs generate income?

Data Center REITs generate income primarily through rental income from leasing space within their data center facilities. Tenants, which include technology companies and cloud service providers, therefore, pay rent to the REITs in exchange for using the data center space.

Are Data Center REITs suitable for income-focused investors?

Yes, Data Center REITs are often suitable for income-focused investors. These REITs typically distribute a significant portion of their income as dividends to shareholders, providing a steady income stream. However, it’s essential to research individual REITs to understand their specific dividend history and policies.

How can I mitigate the risks associated with Data Center REIT investments?

To mitigate risks, consider diversifying your investments across multiple Data Center REITs to spread risk exposure. Also, stay informed about industry trends, economic conditions, and regulatory changes.

Highly Rated Stock Trading & Investing Platform

  • Invest in 2,800+ stocks and other assets including 70+ cryptocurrencies and commodities.

  • 0% commission on buying stocks - buy in bulk or just a fraction from as little as $10.

  • Copy top-performing traders in real time, automatically.

  • Regulated by financial authorities including FCA and FINRA.

2.8 Million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

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