THE rise of artificial intelligence (AI) has been a key theme for investors in recent years, and data centre (DC) assets are likely beneficiaries as the adoption of such technology gains momentum.
Property consultancy JLL noted in its 2025 Global Data Center Outlook that global DC capacity is projected to grow at 15 per cent annually between 2023 and 2027, but this is not enough to meet growing demand.
“The DC sector is on the precipice of enormous, transformative growth driven by the rapid advancement of AI,” it noted, adding that the convergence of rising power requirements and DC growth is leading to a “generational investment opportunity”.
Among the actively traded real estate investment trusts in Singapore (S-Reits), five have exposure to DCs, including pure-play trusts Keppel DC Reit and Digital Core Reit.
Keppel DC Reit reported last month that its net property income rose 6.3 per cent year on year to S$260.3 million for FY2024. Its distribution per unit (DPU) also grew in the same period, by 0.7 per cent year on year, to S$0.09451.
The increase in DPU was driven by contributions from an acquisition as well as strong rental reversions and escalations. The Reit’s manager noted that market trends, including generative AI and strong demand for DCs, have helped the trust achieve robust rental reversion of about 39 per cent in FY2024.
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Keppel DC Reit is focusing on the hyperscale market, continually identifying and redeploying resources into accretive opportunities.
Meanwhile, Digital Core Reit last week reported that its same-store cash net property income rose 0.7 per cent year on year in FY2024, while distributable income rose 10.9 per cent to US$46 million.
The Reit owns a diversified portfolio of 10 facilities valued at US$1.6 billion, concentrated in core DC markets across the United States, Canada, Germany and Japan. The manager noted that cloud and digital transformation fundamentals remained healthy, while AI has dramatically accelerated global DC demand.
Elsewhere, Mapletree Industrial Trust (MIT) in January reported a 1.5 per cent year-on-year increase in DPU for its third quarter ended Dec 31, 2024. Its gross revenue and net property income were also up – by 2 per cent and 2.6 per cent, respectively – over the same period.
Of the Reit’s S$9.2 billion in assets under management, more than half are DCs. It attributed its Q3 growth to higher contributions from its Osaka DC and a newly acquired mixed-use facility in Tokyo, as well as new leases and renewals from its Singapore and North American portfolios.
Other S-Reits that maintain some exposure to DCs include CapitaLand Ascendas Reit (Clar) and CapitaLand India Trust. The latter has four DCs under development, with revenue contribution expected to commence from Q2 2025.
CBRE noted in its US Real Estate Market Outlook 2025 that demand for DC capacity in North America was expected to outpace supply despite record construction activity. The demand growth is driven by digital services, cloud computing, AI and 5G deployment.
While some AI and DC counters sold off last month over reports that Chinese AI startup DeepSeek could build models with comparable performance at a lower cost, the recent developments may bode well for the sector.
UOB Kay Hian analyst Jonathan Koh maintained an “overweight” recommendation on the Reit sector last month, with “buy” calls for Digital Core Reit, Keppel DC Reit, MIT and Clar.
He noted that DeepSeek showcased the rapid pace of innovation in AI, and both US and Chinese AI players could utilise its techniques to reduce the cost to train new AI models. This could spur widespread adoption of the technology.
“Demand for DC for AI training and AI inference would continue to rise,” he added. SGX RESEARCH
The writer is a research analyst at SGX. For more research and information on Singapore’s Reit sector, visit sgx.com/research-education/sectors for the S-Reits & Property Trusts Chartbook.
