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If you’re an investor, you may wonder whether data center Real Estate investment trusts (REITs) are a worthy investment.
It’s a common question asked by investors looking to diversify their portfolios and capitalize on the data storage growth in e-commerce. The data center REIT market is constantly evolving, with many of the largest tech companies now operating their own data centers.
In addition, during the pandemic, REITs hit a market cap of $1.74 billion, so it pays to stay up-to-date on the best available REITs. This guide will show you the top five data center REIT investment options in 2023.
We examined each data center REIT’s performance over time and its potential risks and rewards. We also discuss key considerations when investing in data center stocks or exchange traded funds (ETFs) from a cost perspective.
By the end of this article, you’ll better understand data center REITs and know which ones to watch in the upcoming year.
Here are our top five 2023 data center REITs, ETFs, and stocks to invest in.
Top 5 Best Data Center REITs
- Equinox – Best data center stock
- Digital Realty – Highest dividend yield
- Global X Data Center REIT – Best data center REIT ETF
- Digital Bridge – Best cell tower REIT
- CoreSite Realty – Best cloud storage REIT
Equinox (EQIX) – Best Data Center Stock
Equinix (EQIX) is a data center REIT that has been around for over 20 years. Since its founding in 1998, the company has provided data centers and colocation services to businesses across various industries in more than 27 countries.
The company’s core focus is on providing data storage solutions to clients through its data center facilities. Its data centers allow clients to store their data in secure environments with compliance certifications and industry-leading security.
Moreover, Equinix offers network services such as connectivity solutions, cloud hosting and disaster recovery plans.
In terms of investments, Equinix invests in data centers and data storage-related assets that can generate a high dividend yield with minimal risk on the New York Stock Exchange.
Its portfolio consists of data center properties in strategic global markets.
Digital Realty (DLR) – Best Dividend Yield
Digital Realty Trust (DLR) is a data center REIT and one of the best ETFs. With over 400 properties strategically located in more than 25 countries globally, Digital Realty provides data storage solutions to businesses across multiple industries and growth stocks for investors.
Digital Realty offers a solid dividend yield of 2.76%, which is higher than other dividend stocks. The company also has a strong balance sheet and is well-positioned to continue growing its data center portfolio over the coming years.
We recommend Digital Realty as one of the best data center ETFs for 2023 because it offers investors a way to gain exposure to data storage solutions without taking on too much risk.
In addition, the company has a well-diversified portfolio of data centers and a long history of providing reliable data storage solutions and interconnection services.
This data center ETF is excellent for investors looking for diversification across multiple REIT sectors. It offers a good total return rate and is well-positioned to continue growing its data center portfolio in the upcoming year.
Global X Data Center REIT (VPN) – Best Data Center REIT ETF
This data center ETF is excellent for investors looking for diversification across multiple data center markets. In addition, it offers a high yield of 2.91% and is in a good place to keep growing its data center portfolio this year.
As a result, we recommend Global X Data Center REIT as one of the best ETFs for 2023 due to its strong leadership, low-interest rates and portfolio of diverse data centers located in strategic global markets.
Investors looking for data storage solutions without too much risk should consider investing in Global X Data Center REIT. Not only does it provide data storage services but it also provides investors with the benefits of diversification across data centers.
DigitalBridge (DBRG) – Best Cell Tower REIT
DigitalBridge (DBRG) is dedicated to only digital infrastructure and invests across five digital infrastructures and data-oriented infrastructure sub-sectors.
Its main focus, however, is on data centers. Its data centers offer customer data storage facilities and services, such as cloud REITs, colocation, and data backup for healthcare companies and other businesses.
Its other infrastructure is fiber networks that provide data transmission and communication services. The company also invests in edge data centers, 5G towers and data-oriented real estate properties, such as data analytics hubs.
DigitalBridge has a strong leadership team and business model, making it one of the top data center REITs to consider investing in.
In terms of dividend yields, DigitalBridge doesn’t offer dividend payments, but it is still one of the best data center REITs to invest in due to its strong leadership, business model and portfolio.
In addition, the company’s diversified portfolio of data centers in strategic global markets offers a solid dividend yield for its share prices on the Nasdaq.
Investors looking for data storage solutions without too much risk should consider investing in DigitalBridge. It supports multiple data-oriented infrastructure sub-sectors along with its data storage services, which can be beneficial for long-term investors.
CoreSite Realty (COR) – Best Cloud Storage REIT
CoreSite Realty (COR) is a data center REIT specializing in developing data centers for cloud, content and network customers. It invests in online infrastructure organizations and businesses.
The American Tower Company is the parent company of CoreSite, and it has data centers in strategic markets such as Chicago, Washington D.C., Los Angeles, and New York.
Its average dividend yield is around 4%. CoreSite’s data center metrics consist of data centers designed to meet industry-leading security standards and compliance certifications from leading organizations.
What Are Data Center REITs?
Data center REITs invest in data centers, storage facilities, and data-related infrastructure.
Common uses of data centers include:
- Data storage
- Security and privacy
- Cloud computing
- Cooling equipment
- Reliable power sources
As such, data center REITs provide data storage solutions for individuals and businesses without taking too much risk.
They are ideal investments for investors looking for reasonable stock prices.
Benefits of Data Center REITs
Data center REITs offer several benefits that make them attractive investments.
Portfolio diversification – Investing in data center REITs can benefit from portfolio diversification across the data-related infrastructure.
As a result, it helps to lower overall portfolio risk and provide a more secure investment option for long-term investors.
Professionally managed – Experienced management teams manage data center REITs. They have the expertise to ensure that data centers remain secure and reliable for businesses and individuals.
Increased demand for data storage – The demand for data storage is increasing rapidly due to the rise of data-driven applications and services.
This provides an opportunity for data center REITs to capitalize on this growing demand with their data centers in strategic markets.
Recession-resistant – Data center REITs are generally considered more recession-resistant than other investments due to the data storage solutions they provide.
This makes them a good option for investors looking for long-term investments that can withstand market volatility.
High-dividend yields – Depending on the data center REIT, investors can benefit from high-dividend yields, typically higher than other data-related investments.
This feature makes data center REITs an attractive option for investors looking to generate a steady stream of passive income.
Risks of Investing in Data Center REITs
Investing in data center REITs isn’t without risk. As with any investment, investors should be aware of potential risks.
Economic uncertainties – The data center industry is not immune to economic downturns and recessions.
As such, data center REITs can be subject to economic uncertainties that can impact their performance and long-term profitability.
Competitive industry – The pricing in this industry is extremely competitive because of the accrued leasing activity shares.
Bankruptcies – Data centers are also subject to bankruptcy due to the large amounts of capital required to operate them.
This can lead to losses for investors if the data center REIT they are investing in becomes insolvent due to bankruptcy or other financial difficulties.
How to Invest in Data Center REITs
Investing in data center REITs is a relatively straightforward process. Here are the steps you need to take.
- Choose a data center ETF or stock – First, decide if you want to invest in a data center ETF or an individual data center stock. If you’re looking for portfolio diversification and lower risk, opt for an ETF; otherwise, stocks provide an opportunity for more capital gains.
- Open an account with a brokerage – Next, open a brokerage account with one of the major online brokers, such as Public.com or Webull, so that you can buy your data center REITs on their platforms. Most brokers require personal information, including your Social Security Number, and a minimum deposit.
- Research data center REITs – Once you set up your brokerage account, it’s time to research data center REITs that fit your investment strategy and risk profile. Make sure you read reviews of different data centers and their financial statements before making an investment decision.
- Buy the data center ETF or stock – It is time to buy the data center ETF or individual data center stock you want to invest in. Again, you can do this directly from the broker’s platform or through a third-party trading platform such as Robinhood or Stash Invest.
- Monitor your data center REIT investments – Finally, you should regularly monitor your data center REIT investments and adjust as needed. This could include selling a data center if it’s not performing well or adding additional data centers to diversify your portfolio and reduce risk.
In addition, they offer high dividend yields and the potential for capital appreciation. However, data center REITs can be subject to risks such as economic uncertainty and bankruptcies, so investors should do their due diligence before investing in them.
Nevertheless, investing in data center REITs is relatively straightforward. Investors can start by opening a brokerage account, researching data centers, buying the data center ETF or stock they want to invest in and then monitoring their investments regularly.
With these steps taken into consideration, data storage REITs provide an excellent opportunity for long-term investors who want to capitalize on this growing industry.
Act now and start investing in data center REITs to diversify your portfolio and capitalize on the growth potential of the data infrastructure market.
Data Center REIT FAQs
Here are some commonly asked questions about data center REITs.
Are data center REITs a good investment?
Yes, data center REITs can be an excellent investment for investors looking to diversify their portfolios and take advantage of recession-resistant assets with the potential for capital gains.
However, data center REITs have risks, such as economic uncertainty.
What is the largest data center company?
The most extensive data center company is Digital Realty, a REIT that owns and operates over 260 data centers worldwide.
What is the difference between a data center REIT and a data center company?
On the one hand, a data center REIT invests in data centers. On the other, a data center company is a business that develops, builds, and runs data centers.