Demand for data storage, processing, and cloud services is skyrocketing as consumers and enterprises increasingly depend on digital capabilities. This is leading fundamental shifts in the industrial real estate market, with data centers emerging as an integral part of the new-age real estate scene. With demand for online services on the rise, developers and investors are turning to data centers as the new gold rush in transforming industrial real estate investments. Dov Hertz, a seasoned real estate developer and founder of DH Property Holdings, shares his perspective on how data centers are transforming the industrial real estate landscape and impacting how investments will be made going forward.
The Explosion of Data and the Need for Infrastructure
Data is becoming the world’s most prized commodity, driving everything from cloud computing and big data analytics to AI and IoT. As digital transformation sweeps across industries globally, demand for secure, reliable data storage and processing has never been greater. This growing demand for data infrastructure has driven data centers to the center of industrial real estate development.
“Data centers are the backbone of the digital economy,” says Dov Hertz. “As long as cloud computing, e-commerce, and advanced technologies keep expanding, data centers are no longer a niche of an emerging market—they’re now part of the world’s core infrastructure.”
As companies and individuals generate more information than ever, data centers supply the facilities to house, process, and maintain the information. With more usage of cloud-based applications, online communications, and e-commerce sites, the use of data centers in the current economy keeps rising.
The Shift in Industrial Real Estate Focus
Traditionally, industrial real estate investment has been in warehouses, factories, and logistics facilities. However, with the exponential growth in data generation and usage, developers are now considering data centers as a top investment opportunity.
“Data centers are remaking what we think of as industrial real estate,” Hertz explains. “These data centers require high levels of infrastructure, from high-power equipment and high-grade cooling systems to advanced security features. It’s not about traditional warehouse space anymore—it’s about creating bespoke environments for the digital economy.”
Data centers also possess certain unique requirements that distinguish them from other industrial buildings. They must be situated where there is reliable high-speed internet connectivity, high power grids, and proximity to major markets. They must also be constructed to handle enormous volumes of data and power and high security to safeguard sensitive information.
A Developing Investment Opportunity
The exponentially increasing growth of cloud services, the emergence of remote work, and the availability of digital technologies are all pushing the demand for data centers. The data centers themselves have hence also emerged as an attractive investment avenue for property developers and investors wanting to profit from the growing digital economy.
“Data center investment is a strategic move for real estate investors,” says Hertz. “Data centers provide long-term stable returns due to their critical function in the digital infrastructure. With increasing consumers and businesses moving operations to the cloud, data storage demand will only continue to grow, and data centers will be an increasingly sought-after asset class.”
Compared to traditional industrial real estate, data centers typically enjoy long-term leases from large tenants such as technology giants, cloud providers, and telecommunication firms. The leases provide a stable source of revenue that makes data centers a desirable real estate investment property for investors seeking stable, long-term returns.
Sustainability and the Future of Data Centers
As data centers remain in high demand, so does the requirement that their operations are ecologically friendly. Data centers are power-hungry, using enormous quantities of electricity to run servers and keep them at favorable temperatures. Because of this, developers and operators are striving to integrate renewable sources of energy, energy-efficient cooling systems, and green design principles to help minimize the ecological impact of these centers.
“Data centers must change to meet rising demands for performance and for sustainability,” Hertz continues. “The future of data center development will be about reducing power consumption, maximizing efficiency, and harnessing renewable forms of energy. It’s not just an environmental necessity—it’s an economic one too.”
The push for sustainability in data center construction is paying off in the form of innovations like powering operations with renewable energy, designing energy-efficient cooling systems, and using green building practices. Not only does this reduce the environmental impact, but it also improves operational efficiency and reduces costs, making data centers more attractive to investors.
The Future of Data Centers in Industrial Real Estate
As digitalization gains momentum, the demand for data centers can only go up. For real estate developers and investors, this offers a unique opportunity to diversify their portfolios and reap the rewards of the booming digital economy.
“Data centers are the future of industrial real estate investment,” concludes Dov Hertz. “As demand for data storage and processing keeps expanding, developers and investors will have no choice but to adopt these specialist buildings as an integral component of their portfolios. The potential is massive, and those who invest early in this change will be well-positioned for success.”
The convergence of industrial real estate and digital technology is giving rise to new avenues for growth and innovation. Data centers are no longer merely a component of the technology industry—they are now a part of the industrial real estate industry as well. As data consumption displays no slowdown, these centers will be at the forefront of driving the future of industrial real estate investments.
Dov Hertz also recently did an interview below:
Dov Hertz of DH Property Holdings Interview on NEREJ