Jun 27, 2024 - 0 Comments - Miscellaneous -

Video: Moody Analytics Senior Economist Ermengarde Jabir, PhD on Data Center Real Estate; Sector Trends, Performance, & Forecast

The Conversation: Exploring the Rapid Growth of Data Centers in Commercial Real Estate

The latest episode of America’s Commercial Real Estate Show delved into an increasingly significant topic within the industry: data centers. The show featured Ermengarde Jabir, PhD., Senior Economist with Moody Analytics, as the guest expert. This episode marked the first time this show has explored data centers, reflecting their burgeoning importance in the commercial real estate sector. Dr. Jabir mentions Alan Turing early in the show; love that. This is an interesting interview.

Understanding the Data Center Boom

The conversation began with a discussion about the size and growth of the data center sector. Historically, data centers were considered a niche market requiring specialized knowledge to develop and operate. However, the sector has seen explosive growth in recent years, driven largely by the expansion of cloud computing and the advent of generative AI (gen AI). This growth is not only evident in the increased demand for data centers but also in the technological advancements and infrastructure developments required to support them.

The Need for Power and Resources

One of the key challenges discussed was the immense power and cooling requirements of data centers. Unlike traditional commercial real estate, data centers are often measured in terms of power capacity rather than square footage. This shift underscores the importance of access to reliable power sources and advanced cooling technologies. The conversation highlighted the trend of data centers seeking alternative power sources, such as solar and nuclear power, to meet their growing energy needs. Additionally, the move towards liquid cooling technologies represents a significant advancement aimed at reducing operating costs and improving efficiency.

Q: What is a data center’s favorite song?
A: I’ve Got The Power

Dr. Jabir notes that the gen AI operations are centered around hyperscale which can range from 2 to 100 megawatts of power capacity. With a single megawatt equivalent to the energy use of 750 to 1000 homes, the upper end of this calculation is the equivalent of the power capacity of as many as 100,000 homes. Taken further, with the average home tending to house 2.5 people, this is equivalent to the residential power consumption of a quarter million people. Bigly power.

Cap Rate Trends and Investment Value

Cap rates for data centers have remained competitive, comparable to those of industrial properties and even multifamily sectors. Despite rising interest rates, data centers have maintained and even appreciated in value, demonstrating their resilience and attractiveness to investors. The cost of building and equipping data centers is substantial, leading to a reliance on long-term leases to ensure stability and return on investment.

Location, Location, Location

The importance of location in the development of data centers cannot be overstated. While proximity to major business centers remains relevant, the need for vast amounts of power and cooling resources is driving data centers to more remote locations. Areas like Northern Virginia, also known as “Data Center Alley,” have become global hubs for data centers due to their advanced infrastructure and availability of power. Interestingly, regions with cooler climates, such as Scandinavia, are also becoming popular due to their natural cooling advantages.

The Future of Data Centers

Looking forward, the demand for data centers shows no signs of slowing. The conversation emphasized that while exponential growth may eventually plateau, the sector is still in a phase of rapid expansion. The continuous advancements in AI and cloud computing will likely keep driving the need for more data centers, pushing the industry to innovate and adapt to new challenges.


The discussion with Dr. Jabir provided a comprehensive overview of the data center sector, highlighting its growth, challenges, and future prospects. For anyone involved in commercial real estate, understanding the dynamics of data centers is becoming increasingly crucial as they continue to shape the landscape of the industry.

This detailed exploration into the world of data centers underscores their growing importance and the factors driving their expansion. As the sector continues to evolve, staying informed about these trends will be essential for anyone involved in commercial real estate.

A Florida Related Personal Note on the Topic

Notably, Hawkins Commercial Realty was involved in the past in working to secure a site for a cryptocurrency mining group with a need for several megawatts of power. In that process, we came to realize just how much power that was, and then further that there appeared to be only a couple of very specific locations in the entire state of Florida that had the power supply infrastructure to support this. That was a couple of years ago, but I doubt that situation has changed dramatically, if at all, since. After all, Florida has its hands full accommodating all the people moving into it from other states!