The demand for data centers is skyrocketing, transforming these facilities into one of the most sought-after investments in commercial real estate. As digital technologies drive global connectivity, companies across industries increasingly rely on secure and efficient facilities to store and manage vast amounts of data. This trend presents a significant opportunity for real estate investors and developers .

Dov Hertz, a prominent New York-based real estate developer and founder of DH Property Holdings, which has focused on industrial logistics facilities, highlights the shift: “Data centers have become a critical component  of the digital economy. Their importance to businesses today rivals that of office or industrial spaces in the past.”

Why Data Centers Are in Demand

Data centers are specialized facilities designed to house servers, networking equipment, and other infrastructure that enable businesses to operate in the digital realm. Several factors are driving the rising demand for these properties:

The Rise of Cloud Computing and AI

The proliferation of cloud-based services, artificial intelligence, and big data analytics has drastically increased the need for scalable, secure, and energy-efficient data centers. Companies are prioritizing these facilities to meet growing digital storage and processing requirements.

E-commerce and Streaming Growth

E-commerce giants and streaming platforms rely on data centers to manage transactions, optimize customer experiences, and store vast libraries of content. This reliance has fueled the development of facilities capable of handling high data loads.

Remote Work and Digital Transformation

The shift to remote work and rapid digital transformation, particularly post-pandemic, has reinforced the need for reliable data infrastructure. Businesses are investing heavily in technology solutions that depend on robust data center support.

“Every industry, from retail to healthcare, now depends on data centers to function efficiently,” says Dov Hertz. “Investors who recognize this shift are positioning themselves at the forefront of a surging market, in New York City and beyond.”

Impact on Commercial Real Estate

The rising demand for data centers is reshaping the commercial real estate market in several key ways:

Premium Pricing

Properties suitable for conversion into data centers or located near critical infrastructure are commanding premium prices. Essential features include access to abundant power, connectivity, and cooling systems.

Adaptive Reuse Projects

Developers are increasingly converting underutilized properties—such as warehouses, industrial facilities, and even office buildings—into state-of-the-art data centers. These adaptive reuse projects cater to the sector’s need for strategic locations and quick development timelines.

Sustainability and Green Design

Environmental concerns are pushing developers to incorporate sustainable practices in data center design. Features like energy-efficient cooling systems and renewable energy integration are becoming key selling points.

Challenges in Data Center Investments

While the sector offers immense potential, investors must navigate challenges:

• High Development Costs: Building a data center requires significant capital investment, particularly for advanced infrastructure and energy requirements.
• Zoning and Location Constraints: Securing locations with adequate power and connectivity while adhering to zoning regulations can be complex.

The Road Ahead

The data center market is expected to grow exponentially, driven by continuous advancements in technology and increasing reliance on digital infrastructure. Industry forecasts project the global data center market to grow at a compound annual growth rate (CAGR) of over 10% through 2030.

Dov Hertz emphasizes the sector’s long-term potential: “Data centers are not just a short-term trend; they are foundational to the future economy. The investors who align with this trajectory will reap the benefits for decades to come.”

Conclusion

Data centers are emerging as a cornerstone of commercial real estate, providing investors with a unique opportunity to align with the demands of the digital era. As the need for data storage and management continues to grow, these facilities will remain a key driver of innovation and value in the East Coast real estate market.

Dov Hertz said: “The commercial real estate market continues to evolve, and data centers are leading the charge. This sector offers a rare combination of high demand, innovation, and long-term stability”

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