The commercial real estate (CRE) industry is undergoing a major transformation as data centers emerge as one of the most sought-after asset classes. The rapid expansion of cloud computing, artificial intelligence (AI), and the Internet of Things (IoT) has driven demand for large-scale data storage and processing facilities. As businesses and governments increasingly rely on digital infrastructure, the demand for data centers has skyrocketed, influencing real estate markets globally.

The Rise of Data Centers in Commercial Real Estate

Data centers have become an essential component of the digital economy. Traditionally viewed as specialized infrastructure, they are now a major driver of commercial real estate investment, leasing, and development.

As data centers continue to grow in importance, their role in the real estate market is expanding beyond just providing storage and computational power. With the increasing demand for uninterrupted service, these facilities require highly specialized design and operational standards. This includes the integration of advanced infrastructure that supports high levels of redundancy and proactive maintenance strategies.

“In my experience, especially from an operations standpoint, critical facilities require a redundancy mindset and a proactive team that can think ahead to avoid downtime”, said Brock Gallman, Chief Engineer with Bank of America Plaza.”

Key Factors Driving Demand for Data Centers:

Major technology firms such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud are rapidly expanding their cloud infrastructure, fueling demand for new data centers. Additionally, with the rise of Artificial Intelligence (AI), applications require immense computational power, leading to the construction of advanced data centers with high-performance computing capabilities. The deployment of 5G networks is also increasing the need for edge data centers, which bring processing power closer to end-users, reducing latency. The shift to cloud-based collaboration tools and remote work environments has accelerated the need for data processing and storage facilities. In terms of sustainability, energy efficiency and renewable energy integration have become crucial factors in data center development, leading to the rise of green data centers.

Commercial Real Estate Trends in Data Centers

As data centers continue to shape the CRE landscape, several key trends are emerging:

Hyperscale Data Centers Dominating the Market

Hyperscale data centers, which serve major cloud providers and large enterprises, are seeing explosive growth. These facilities, often exceeding 100,000 square feet, house thousands of servers and require advanced cooling and power management systems.

Increased Investment from REITs and Private Equity

Real Estate Investment Trusts (REITs) specializing in data centers, such as Digital Realty and Equinix, have been actively acquiring and developing new properties. Private equity firms and institutional investors are also pouring billions into data center assets due to their long-term revenue potential.

Adaptive Reuse of Commercial Properties

As demand for office space declines in some regions, developers are repurposing vacant commercial properties into data centers. Former retail spaces, warehouses, and even industrial facilities are being converted to support digital infrastructure.

“Even routine maintenance or minor repairs can take days or weeks to implement, as every step must be meticulously planned, peer-reviewed, and approved by the customer,” Gallman said. “For spaces repurposed or adapted for data center use, operators often face challenges, particularly when HVAC or electrical redundancy is lacking. Critical facility operators develop skills and complete tasks while under pressure to avoid those costly downtimes,” added Brock.

Sustainability Initiatives in Data Centers

Data centers, known for their high energy consumption, are increasingly prioritizing sustainability in their operations to mitigate their environmental impact. Operators are integrating renewable energy sources such as solar, wind, and hydroelectric power to reduce their reliance on traditional, non-renewable energy. By shifting to these cleaner energy options, data centers are taking steps toward minimizing their carbon footprint.

In addition to renewable energy, data centers are adopting water-efficient cooling systems to address the substantial water usage associated with cooling vast amounts of equipment. These systems help reduce water waste while maintaining optimal temperatures for the servers and technology inside the data centers.

Furthermore, many data center operators are setting carbon-neutral goals, aiming to eliminate or offset the emissions generated by their operations. Through a combination of renewable energy use, energy-efficient technologies, and carbon offset programs, data centers are working toward achieving emissions reduction targets that align with global sustainability efforts. These initiatives ensure that they can meet the growing demands of the digital economy without compromising the planet’s resources.

Growth of Secondary Markets

While major metropolitan areas such as Northern Virginia, Silicon Valley, and Dallas remain primary data center hubs, secondary markets like Phoenix, Atlanta, and Chicago are emerging as cost-effective alternatives with lower land and energy costs.

Current Events Impacting Data Centers and Commercial Real Estate

Several recent developments are shaping the future of data centers in CRE. Based on the following, property management professionals should take into account targeted ways to address these influences.

AI-Driven Data Center Expansion

Companies such as NVIDIA and OpenAI are driving demand for data centers designed to support AI workloads. These facilities require enhanced processing power, liquid cooling systems, and high-density server racks.

Government Regulations and National Security Concerns

Governments worldwide are enacting stricter regulations on data center operations due to concerns over cybersecurity, data sovereignty, and foreign investment in critical infrastructure. The U.S. and European Union have introduced policies to ensure data security and prevent foreign control over key assets.

Supply Chain Disruptions and Construction Delays
The global semiconductor shortage and supply chain disruptions have led to delays in data center construction. Developers are facing increased costs and extended timelines due to material shortages and logistical challenges.

Expansion of AI and Edge Computing Infrastructure

The growing need for real-time data processing is driving the expansion of edge data centers, which are smaller facilities located closer to end-users. These centers enable faster data transfer for applications such as autonomous vehicles, smart cities, and industrial automation.

The Future of Data Centers in Commercial Real Estate

Looking ahead, the intersection of data centers and commercial real estate will continue to evolve, driven by technological advancements, regulatory changes, and shifting market dynamics.

“In commercial real estate, those operators with critical facility experience can thrive in an environment that is not-so-critical,” Gallman said. “For larger office buildings or facilities with intricate systems, an engineer with this background will definitely stand out in a stack of resumes.”

Data centers are transforming the commercial real estate industry, driving investment, innovation, and sustainability initiatives. As the demand for digital infrastructure continues to surge, commercial real estate stakeholders must adapt to the evolving landscape. With advancements in AI, cloud computing, and 5G, the future of data centers in CRE promises to be dynamic, resilient, and essential for global connectivity.

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