Data Center Developers Secure Billions in Debt Financing as Private Equity Backers Benefit From Timely Bets

Data center financing is booming in the AI adoption era as private equity-backed developers are pushing to increase construction of new facilities. New data center inventory grew by nearly a quarter in Q1 YoY, but vacancy continues to slip toward record lows. That imbalance is supercharging rental rates and keeping capital surging into data center development. Bottlenecks in land and electricity could slow the buildout of infrastructure but the acquisition of assets in the cryptocurrency and digital asset space could provide an alternative route for private equity to expand its holdings of computing power assets.

Related ETF & REITs: Global X Data Center REITs & Digital Infrastructure ETF (DTCR), Digital Realty Trust, Inc. (DLR), Equinix, Inc. (EQIX)

New figures from CBRE’s Global Data Center Trends 2024 report show that North American data center vacancy has continued to trend lower after falling to 3.7% in the second half of 2023 – close to a record low. Though an updated rate for the entirety of NA was not disclosed in the most recent report, CBRE notes that some markets are experiencing vacancy below 1.0%. In Northern Virginia, a hotbed for data center activity, vacancy is now assessed at just 0.9%, down from 1.8% the year prior. The drop in availability has defied NA data center inventory growth of 24.4% YoY in Q1. Certainly, a lot of building is occurring, but capacity is absorbed quickly as it comes onto the market.

Throughout the first five months of 2024, Linklaters claims $22 billion was invested globally in data centers, on pace to easily surpass the $36 billion spent last year. Massive rounds of financing are now being lined up by private equity-backed developers to continue piling cash into…