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 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.
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 $60.8 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 recognized Equinix for their use of renewable energy and other environmentally friendly behaviors.
Equinix stock quickly rebounded from the COVID-19 market crash in March. The company had returned to pre-COVID market performance by April and steadily rose to its highest price in history in October of 2020, at $835 a share. Share performance has since tapered off slightly, which suggests that now is great time for investors to take advantage of this undervalued REIT. Analysts expect returns to be well above average over the next year.
Digital Realty Trust, Inc. (NYSE:DLR)
Digital Realty has the second-largest market cap on our list, coming in at $36.78 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 also had a quick rebound from the pandemic downturn in March. By April, they had already reached new market highs. The company reached its highest trading price in July of 2020, trading at $160 per share. Since then, Digital Realty shares have trended slightly downward, suggesting it may be undervalued. Market experts are predicting strong returns for the next several years, making this a good long term investment. Take advantage of this tech real estate investment while it’s cheap, and while it’s just a fraction of the price of its main competitor, Equinix.
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 $5.02 billion, making them significantly smaller than Digital Realty. That said, the company owns 23 data center facilities across 8 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 at 4.19%. 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 fairly stagnant in the months since then. 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 $3.28 billion. The company’s market performance has continued to grow since 2019, with a slight dip in March 2020. That said, QTS quickly rebounded like the other data center REITs in this article.
Since their most recent rebound, QTS has stagnated slightly. This publicly-traded REIT is now worth over $59 a share. QTS has a diversified portfolio with data centers on multiple continents, which shows good promise for growth in the coming years. Businesses around the world are relying on data centers as they expand their online presence. Experts project that this real estate investment will have strong returns over the next five years, so now is a great time to grab it.
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 $8.3 billion, CyrusOne is ready for large growth and return in the coming years from their regionally diverse investments and customers.
CyrusOne currently trades at nearly $69 a share. Their shares have performed very similarly to the other data centers on our list. Their growth has stagnated slightly in recent months, but there’s still plenty of potential for growth in the future.
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.