Data center real estate investment trusts (REITs) have beaten the odds to do well during the COVID-19 pandemic. Stay at home orders have meant that people are more reliant on their personal technology than ever. Data center REITs and the facilities they’re invested in have played an integral part in keeping the economy up and running.
Data centers provide the infrastructure for companies in many different industries to store their data. Even before the pandemic, people were becoming much more reliant on technology for both work and leisure. This made data center REITs an excellent long-term investment.
Even though the pandemic is starting to come to a close, there’s still going to be demand for data center storage space. Digitization isn’t going away anytime soon, as consumers have gotten used to the convenience of digital services.
Real estate investors looking for long term growth opportunities should keep an eye on data center REITs. We’ve put together a list of the best data center REITs to add to your investment portfolio. Now is a great time to invest in the tech sector!
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Best Data Center REITs To Buy
Equinix, Inc. (NASDAQ:EQIX)
Equinix was founded in 1998 and is headquartered in Redwood, California. Equinix has the largest market cap of any data center REIT on our list at $61.4 billion.
The company focuses on internet connection services and holds a large portfolio of data center real estate. All together, Equinix is a leading global provider of colocation data centers. Their portfolio of holdings includes 210 data centers in 25 different countries across 5 separate continents.
Additionally, the US EPA has recognized Equinix for their use of renewable energy and other environmentally friendly behaviors. With climate change becoming an increasingly serious issue, this could be an advantage for Equinix in the future.
This company’s most recent earnings report was a positive one. Their earnings and funds from operation both grew steadily year-over-year. Many analysts are projecting continued growth in 2021 as well.
However, their share price dropped in February due to worries about pricing and competition in the industry. However, share prices have rebounded through March and April.
Digital Realty Trust, Inc. (NYSE:DLR)
Digital Realty has the second-largest market cap on our list, coming in at $39.89 billion. The company invests in data centers in addition to providing colocation and peering services.
With 225 data center facilities amounting to 34.5 million square feet of rentable space, Digital Realty’s portfolio is spread out amongst 4 separate continents. Like Equinix, Digital Realty is another leader in the data center space that has pioneered energy-efficient data center designs.
Digital Realty rebounded quickly from the challenges of the pandemic. Their share prices hit all-time highs in August 2020, although they have been quite volatile since then. Some of this volatility was due to year-over-year FFO per share losses.
However, some of these losses were due to Digital Realty Trust’s recent expansions, as it takes some time for new properties to start generating solid revenue numbers. With such a large portfolio, Digital Realty has a huge amount of potential for growth as demand for data centers continues to grow.
High Yield Data Center REITs
CoreSite Realty Corporation (NYSE:COR)
CoreSite Realty is similar to Digital Realty in that they focus on carrier-neutral data centers and act as a provider of colocation and peering services. The company has a market cap of $5.21 billion, making them significantly smaller than Digital Realty.
However, the company owns 23 data center facilities across 8 geographical markets, accounting for 4.6 net million rentable square feet. At the moment, all of the company’s holdings are based in North America. This makes them a bit less diversified than some of the other REITs on our list.
CoreSite Realty has an excellent dividend yield of 4.06%. This makes it very effective for a long-term wealth-building strategy. Just like the previous two REITs, CoreSite recovered quite quickly from the market drop in March 2020.
However, the company’s share prices have been somewhat volatile in the months since then. Right now, experts believe that this stock is fairly valued. There’s still the potential for excellent returns in the months to come. CoreSite could be a great investment for any individual looking to diversify their real estate asset class.
Cheap Data Center REITs
QTS Realty Trust (NYSE:QTS)
QTS Realty Trust is the cheapest real estate investment trust on our list of hot buys. The company is another leading provider of data centers across North America and Europe. QTS Realty owns more than 7 million square feet of mega-scale data center space, coming in at a market cap of $4.08 billion.
This stock has seen fairly steady growth over the last few years, albeit with a few struggles due to the stock market crash in 2020. While their share price has rebounded since then, it appears that QTS stock has stagnated a bit over the last several months.
However, there’s still plenty to like about this data center stock. They have data centers on multiple continents, and this multi-market presence shows promise for the coming months. Like many other REITs, QTS Realty also has a high dividend yield of 3.19%.
Some experts believe this stock is slightly overvalued at the moment. Because of this, investors may want to wait for share prices to dip slightly before investing. However, there’s plenty of long term potential for this REIT.
CyrusOne, Inc. (NASDAQ:CONE)
CyrusOne is another affordable data center REIT. CyrusOne provides carrier-neutral data centers in addition to colocation and peering services. The company owns a portfolio of 49 operating data center facilities in 12 markets across the United States, London, and Singapore. With a market cap of $8.34 billion, CyrusOne is one of the largest data center REITs on the market.
This company has a portfolio that spans several in-demand markets, which should be an advantage for them in the months to come. Like many other data center REITs, this stock quickly rebounded from the market crash in March 2020, but has since fluctuated in price.
CyrusOne is set to make their next earnings report soon. Analysts are predicting positive revenue growth. Potential investors will want to keep an eye on the company’s earnings numbers before making investment decisions.
Should You Buy Data Center REITs?
Now is an excellent time to buy data center REITs. Data center REITs have been on the up and up for several consecutive quarters. During the last quarter of 2020 share prices have stagnated a bit. This is likely a result of the US election and the continued uncertainty surrounding COVID-19.
This means that most, if not all the selections on our list are currently undervalued. Additionally, investment experts are predicting huge returns for the entire sector over the next few years. Data centers will be integral to the world economy moving forward, so now is a great time to invest in them.
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Data Center Reits: Final Thoughts
While other sectors are struggling, data center REITs have almost performed as if there isn’t a global pandemic occurring. While they’ve taken a slight downturn, now is a wonderful time to snatch up a few shares of these REITs and grow your investment portfolio in the years to come.