The Best-Kept Secret in Asset Classes

Huffman: “It’s very disruptive for tenants to move their IT equipment. When an investor owns a building like this and has 15 to 20 years on a lease, it’s a pretty good bet that the tenant—and it’s usually a credit tenant—will not leave and will invest a lot of money in the building.”

ATLANTA—Data-center sale/leasebacks make sense for investors who are seeking limited tenant turnover, high cap rates and TIs that keep the property current, Colliers International EVP Tim Huffman tells GlobeSt.com. Those TIs are also often paid for by the tenants. While not one of the most talked about property types in commercial real estate, data centers are highly sought after as sale/leasebacks by a number of REITs attracted to their low maintenance and strong yields.

The core drivers creating interest from investors in data-center sale/leasebacks start with the tenant profile: a company with a mission-critical operation—describing hardware or software that’s vital to the functioning of an organization—in a building. “It’s a very sticky kind of tenant,” Huffman explains. “It’s very disruptive for tenants to move their IT equipment. When an investor owns a building like this and has 15 to 20 years on a lease, it’s a pretty good bet that the tenant—and it’s usually a credit tenant—will not leave and will invest a lot of money in the building.”