Data Center Real Estate: Cap Rates, Costs, and Demand | Ermengarde Jabir, Moody's

Data center demand is booming, but the buildings are going obsolete faster than they can fill up. Michael Bull, CCIM digs into the numbers with Ermengarde Jabir, PhD, Director of Economic Research at Moody's Analytics.

The US data center market is now 31 to 32 gigawatts of power, and power, not square footage, is the right way to size it. Ermengarde explains why a 50,000 square foot data center built 10 or 15 years ago might now need only 25,000 square feet to house the newer racks and servers, leaving half the building empty. She walks through the sector's cap rates, a competitive 4% to mid-5% range, the shrinking risk premium as the 10-year Treasury pushes past 4.6%, and who is actually building these now, from traditional developers to the big tech owner-operators alongside long-time REITs Digital Realty and Equinix.

The conversation covers the data center types from co-location to hyperscale, why the shell is simple like an industrial warehouse but the interior build-out and cooling are where the cost lives, office-to-data-center conversions and the load-bearing floor test that makes or breaks them, the moratoriums and lost-tax-base math driving local approvals, and what the AI build-out really means for jobs. Ermengarde's bottom line on employment: not more or fewer jobs, but different jobs.

In this episode:

00:00  Intro: The Data Center Debate
01:23  How Big Is the Market? 31 to 32 Gigawatts of Power
02:18  Why Power Beats Square Footage, and the Obsolescence Problem
03:53  Data Center Types, From Co-Location to Hyperscale
04:47  Who Is Building Now: Developers, REITs, and Big Tech
07:54  Hyperscale Build-Out and the Shift to Liquid Cooling
10:28  Data Center Cap Rates: 4% to Mid-5% and the Risk Premium
12:11  Office-to-Data-Center Conversions and the Load-Bearing Test
14:08  Moratoriums, Zoning, and the Local Tax-Base Math
16:03  The Future: Why Exponential Growth Cannot Last
19:11  Data Centers and Jobs: Construction vs Permanent
22:43  AI and Employment: The 4.1% Headline and What It Hides
25:35  Office-Using Employment: Peak or Another Cycle?
27:03  Final Takeaway: Different Jobs, Not Fewer

Connect with Ermengarde Jabir, PhD:
https://www.linkedin.com/in/ermengarde-jabir-phd-3114829a/
Moody's Analytics Website: https://www.moodysanalytics.com

Connect with Michael Bull & The Show:
Michael Bull, CCIM
Bull Realty, Inc
https://www.linkedin.com/in/michaelbull/

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