The Rise of Artificial Intelligence and its Impact on Data Centre Assets
The rise of artificial intelligence (AI) has been a key theme for investors in recent years, and data centre (DC) assets are likely beneficiaries as the adoption of such technology gains momentum.
Global Demand for Data Centres
Property consultancy JLL noted in its 2025 Global Data Center Outlook that global DC capacity is projected to grow at 15% annually between 2023 and 2027, but this is not enough to meet growing demand.
A Generational Investment Opportunity
"The DC sector is on the precipice of enormous, transformative growth driven by the rapid advancement of AI," JLL noted, adding that the convergence of rising power requirements and DC growth is leading to a "generational investment opportunity."
S-Reits with Exposure to Data Centres
Among the actively traded real estate investment trusts (S-Reits) in Singapore, five have exposure to DCs, including pure-play trusts Keppel DC Reit and Digital Core Reit.
Keppel DC Reit’s Performance
Keppel DC Reit reported last month that its net property income rose 6.3% year on year to S$260.3 million for FY2024. Its distribution per unit (DPU) also grew in the same period, by 0.7% year on year, to S$0.09451.
Digital Core Reit’s Performance
Digital Core Reit last week reported that its same-store cash net property income rose 0.7% year on year in FY2024, while distributable income rose 10.9% to US$46 million.
Other S-Reits with Exposure to Data Centres
Mapletree Industrial Trust (MIT) in January reported a 1.5% year-on-year increase in DPU for its third quarter ended Dec 31, 2024. Its gross revenue and net property income were also up – by 2% and 2.6%, respectively – over the same period.
Rise of Artificial Intelligence and Data Centres
The rise of AI has dramatically accelerated global DC demand, driven by digital services, cloud computing, AI, and 5G deployment. CBRE noted in its US Real Estate Market Outlook 2025 that demand for DC capacity in North America was expected to outpace supply despite record construction activity.
Analyst’s Take
UOB Kay Hian analyst Jonathan Koh maintained an "overweight" recommendation on the Reit sector last month, with "buy" calls for Digital Core Reit, Keppel DC Reit, MIT, and Clar. He noted that DeepSeek showcased the rapid pace of innovation in AI, and both US and Chinese AI players could utilise its techniques to reduce the cost to train new AI models.
Conclusion
The rise of AI has significant implications for the demand and supply of data centre assets. As the global DC capacity is projected to grow at 15% annually between 2023 and 2027, it is likely that S-Reits with exposure to DCs will benefit from this trend.
FAQs
Q: What is the growth rate of global data centre capacity?
A: Global DC capacity is projected to grow at 15% annually between 2023 and 2027.
Q: Which S-Reits have exposure to data centres?
A: Five S-Reits have exposure to DCs, including Keppel DC Reit and Digital Core Reit.
Q: What is the outlook for the Reit sector?
A: UOB Kay Hian analyst Jonathan Koh maintains an "overweight" recommendation on the Reit sector, with "buy" calls for Digital Core Reit, Keppel DC Reit, MIT, and Clar.
Q: How will AI impact the demand for data centre assets?
A: The rise of AI has dramatically accelerated global DC demand, driven by digital services, cloud computing, AI, and 5G deployment.
