Data centre S-REITs take the spotlight as investors ride AI wave

There are two REITs with substantial data centre assets in Singapore.

Investor frenzy surrounding artificial intelligence has boosted demand for data centres and real estate investment trusts (REITs) investing in them.

In Singapore, there are two REITs with substantial data centre assets: Keppel DC REIT (KDCReit) and Digital Core REIT (DCReit). Other S-Reits with data centre exposure include Mapletree Industrial Trust and Ascendas Reit.

KDCReit has 23 data centres across nine countries as of 30 June. In 1H23, the REIT saw improved gross revenue of $140.5m (+3.6% YoY) and net property income of $127.4m (+3.3% YoY). The REIT’s distribution per unit (DPU) likewise rose, increasing to $0.05051 from $0.05049.

Citing KDCReit’s August 2023 presentation, SGX said the REIT’s demand was underpinned by strong market fundamentals, with the growth of generative AI applications such as ChatGPT and Bard seen to “accelerate demand for data centres and help push for facilities with higher power density”.

“KDCReit pointed to forecasts by Structure Research that predicted the global data centre colocation and interconnection market will grow 12 per cent yoy to US$72.7 billion in 2023,” SGX said.

“Continued expansion by hyper scalers, growth in consumer and enterprise activities and the adoption of cloud computing, digital transformation initiatives and AI will provide support demand for data centres,” SGX added, quoting KDCReit.

DC Reit, on the other hand, has 11 data centres located in key metros in the US, Canada and Germany as of 30 June.

Like KDCReit, DC Reit also highlighted how AI is expected to contribute to “continued growth in digital spending as a percentage of global GDP”.

CapitaLand Ascendas Reit (CLAR), which recently completed the acquisition of its fifth data centre in the UK for S$200m, said it is “capitalising on favourable market dynamics” to scale up its presence in the data centre sector.