Blackstone Completes Another Data Center Deal with COPT

Blackstone Real Estate is making a bigger bet on data centers.

Funds affiliated with Blackstone Real Estate have formed joint ventures with Corporate Office Properties Trust (COPT). Those ventures will acquire interests in eight single-tenant, data center shell properties totaling 1.3 million square feet and valued at $293 million.

This is the latest in several deals between COPT and Blackstone.

Blackstone Real Estate acquired a 90% interest in two of COPT’s wholly owned data center shell properties valued at $90 million in a recently closed transaction. Additionally, Blackstone Real Estate signed an agreement to acquire a 90% interest in six other data center shell properties partially owned by COPT. That transaction is expected to close before the end of the year.

Last year, COPT sold a 90% stake in two single-tenant data center shell properties in Virginia to its joint venture with Blackstone.

“We believe data centers will continue to benefit from strong secular tailwinds, including immense demand growth as internet traffic and the use of cloud services continue to rise,” Tyler Henritze, Head of Acquisitions Americas for Blackstone Real Estate, said in a prepared statement. “These transactions are attractive opportunities to invest in high-quality powered shell warehouses in the premier market globally. We have an excellent partner in COPT and look forward to continuing to build our relationship over the long-term.”

Blackrock isn’t the only behemoth increasing its exposure to the data center space. In October, the Goldman Sachs Merchant Banking Division partnered with long-time data center industry executive Scott Peterson to launch Global Compute Infrastructure. It initially committed to fund up to $500 million of equity capital, primarily from its infrastructure fund, West Street Infrastructure Partners III, LP, to enable approximately $1.5 billion in near-term investments deployed across North America, Europe, Asia Pacific and Latin America.

Data centers have shown tremendous resilience through the pandemic. CBRE Group issued a report finding that the seven primary US data center markets registered 134.9 megawatts of neg absorption in the first half of the year. Although this was down from record levels seen in the first half of 2018 and 2019, the numbers are still higher than the same periods in 2016 and 2017.

In some ways, COVID has boosted data center demand as more people are working from home.

“A lot of networks had to do very significant upgrades to their capacity to really meet that work from home surge,” said Charles Meyers, CEO of data center REIT Equinix, on the CBRE’s “The Weekly Take” podcast.