Data centers form 40 percent of the total target investment for more than 50 global real estate funds, according to a report from Linklaters.

Out of the $50 billion target size for total investment across all asset classes, the capital being raised specifically for data center investment is said to stand at more than $20 billion.

Data centers have found themselves the target of real estate fund managers in recent years, with a record amount raised in 2023.

The spike in capital raised can be attributed to difficult environments in other asset classes, such as retail and offices, and the digital transformation of global economies.

In particular, the uptake of artificial intelligence (AI) technologies and cloud computing has fueled digital infrastructure needs.

The report added that investor appetite in the sector is expected to continue growing.

“Our data needs are higher than ever and as a result, we are seeing data centers being developed on an increasingly global scale, from Europe to the US, Asia, and the Middle East. The sector presents exciting opportunities for both the private and public markets in terms of equity investment. A crucial consideration is ensuring a clear exit strategy and whether we start seeing public market listings, alongside more traditional exit routes such as asset sales, will be an interesting trend to watch,” said David Martin, partner and co-head of Linklaters’ digital infrastructure offering.

Jack Shand, managing associate of real estate, added: “Long-standing real estate investors and developers are increasingly seeking exposure to the sector. Traditional property stalwarts bring expertise in construction and development, and many have access to extensive landbanks to help unlock data center developments where land supply is constrained.

“However, data centers present unique challenges. Operations are often highly technical and specialized, requiring expertise either in-house or through joint ventures with experienced operators. Data center tenants and occupiers are also different: from global hyperscalers with exacting requirements to young companies with untested covenant strengths.”

Linklaters has been involved in a number of data center deals, including Brookfield’s acquisition of the Data4 site from AXA Investment Managers, and the EXA Infrastructure sale of seven Edge data centers in Europe.