Data Centers Can Be a Sound Investment Strategy in 2016

Big Data

If one thing is clear, big data has a bright future ahead of it. More businesses and organizations than ever before have bought into the idea of collecting vast amounts of data, analyzing it, storing it, and eventually using it to improve operations, make accurate forecasts, and even create new products and services. With such tremendous potential, many investors have seen big data as a clear target for growth. Pinpointing just how to invest in it, however, has been a challenge. One could notice a promising startup and ride it out as the business grew or failed, depending on what they offered. A more likely scenario that investors are paying more attention to is that of data centers. In many ways, data centers are the hub from which all big data analytics is done, and as big data continues to grow, so will the data centers that feed it.

While no investment strategy is 100 percent guaranteed to make a profit, an investment in data centers is definitely a sound decision. As Forbes contributor Ely Razin puts it, data centers are basically “a meeting point between real estate and technology.” And as we’ve seen in recent history, those two areas can lead to big profits and major advances for investors. The recent growth of big data and data centers simply can’t be ignored in this respect. A recent report from JLL predicts that the North American data center market will grow by 14 percent in just the next two years. The same report also shows that data center employment has grown by 7 percent annually since 2010. Data centers are not only growing, they’re encouraged to grow by communities and industries since they can stimulate the economy, strengthen businesses, and provides more jobs for professionals in high-tech careers.

There’s good reason for the repeated emphasis on big data: businesses want to use it more. Financial organizations can use analytics to prevent fraud. Manufacturers can make their processes more efficient, thus saving on costs and downtime. Transportation companies can track their vehicles and ensure the best routes are being used. Even sports teams can use big data to scout for the best players and strategize for the next game. With this greater use of big data comes the need for more data centers, both those provided by publicly offered infrastructure and those constructed privately. And with an investment in the data center real estate comes an investment in the technology used to run it, whether it be with hardware, or big data tools like Hadoop vs. Spark. Investing in data centers speaks to versatility.

Much of this can be done through data center real estate investment trusts (REITs). Put in simple terms, data center REITs provide infrastructure and connectivity so that organizations and enterprises can run IT workloads and applications found on private and public clouds. REITs have seen tremendous growth in recent years, and most signs point to that growth continuing on into the future. Part of the reason for such optimism is that data centers in general and REITs in particular capitalize on a number of trends that are showcasing an upward trajectory. Those trends include the rise of cloud computing, increased demand for streaming data (like in the case of Netflix), an explosion in the use of social networks, and the Internet of Things (IoT). The IoT in particular is just getting started and could have tens of billions of connected “things” before the decade is out. Data centers will be needed to analyze the information collected from connected devices, meaning the time is now to invest.

Another trend associated with data centers is one not often talked about. Many data centers have shown a tendency to favor renewable energy sources, and with the “going green” trend gaining steam, this will likely work for their benefit. Data centers are placing an emphasis on adopting solar and wind power as a way to generate energy for their technology while also keeping the costs of running those data centers down. For data centers located in places with more abundant renewable energy, this represents a smart business move and should be something investors consider.

The growth of the data center market can’t be ignored. In fact, investment in data centers is about as sound of a strategy as one can make in the new year. More businesses want big data, and data centers are the way to get it. With that explosive set to continue, savvy investors would be on the right track to take advantage of it right now.

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