Data Center REIT CEO Andy Bauer: There is no oversupply of real estate

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He also loves super scale Nvidia, Amazon, Google and dead More and more data center projects are announced, the bubble cries grow louder. Some say the sector is already overbuilding a market that is still in its infancy with many unknowns ahead. There are also concerns that financing some of these projects is risky.

Quite the opposite, says Andy Bauer, CEO of Digital Realty, the world’s second-largest data center REIT.

Bauer has been with the company for 25 years, and said he’s not concerned about too much construction work in the sector.

“Based on actual real demand from real customers with real long-term 15-year contracts, we are not in an oversupply situation today,” he told Property Play.

The global data center sector is poised to continue unprecedented expansion, with capacity expected to nearly double from 103 gigawatts to 200 gigawatts by 2030, according to new forecasts from JLL. This is of course driven by artificial intelligence, which JLL says is rapidly reshaping the data center landscape. The real estate research firm expects AI workloads to account for half of all data center capacity by 2030. It also says that “property metrics do not indicate a bubble.”

In fact, JLL expects that the growth of the sector will need up to $3 trillion in total investment over the next five years, including $1.2 trillion in real estate asset value creation and approximately $870 billion in new debt financing. The report calls it the infrastructure supercycle.

“We are witnessing the most significant transformation in data center infrastructure since cloud-native migration,” said Matt Landeck, Global Head of Data Centers and Critical Environments at JLL. “The sheer scale of demand is extraordinary. Hyperscalers are allocating $1 trillion in data center spending between 2024 and 2026 alone, while supply constraints and four-year grid connectivity delays are creating a perfect storm that fundamentally reshapes how we approach development, energy sourcing and market strategy.”

JLL expects AI workloads to account for half of all data center capacity by 2030, compared to about 25% in 2025.

Digital Realty’s Power outlook is more substantive. He says the sector is simply relying on technology trends such as cloud computing and digital transformation that have long tailwinds.

“Will there be ups and downs along the way? I’m sure there will be,” Power said. “But these are trillion-dollar companies that have real cash flow and companies that are investing in that innovation. And we in digital centers and data centers, the way we do that in particular, we’re really trying to do it in a way that’s durable over the long term that will insulate us and help meet the needs of everyone in that area.”

Power also said that the real estate side of the AI ​​arms race is less at risk than the scalers themselves.

“In our strategy and the bricks and sticks and the physical infrastructure that we’re investing in, I see tremendous insulation to any kind of shock. We’re basically in a place where demand is dramatically outpacing supply, so speculative data center building is happening, and you can’t build it fast enough for customers,” Bauer said, adding that vacancies at Digital Realty are the lowest they’ve ever been.

As with all properties, Bauer also pointed to the location. Digital Realty invests in regions where workloads require data, such as Northern Virginia; chicago; Dallas, Texas; Even Singapore, Tokyo, Frankfurt and London – “close to eyeballs, consumption and devices,” he says.

However, on the financing side, Barry Sternlicht, chairman of Starwood Capital Group, and others have raised concerns.

“What we’re seeing now is the creditworthiness of the tenant, especially Oracle, because Oracle is doing all these chat-enabled deals[GPT]“And Chat is a startup that’s not making money and requires hundreds of billions of dollars to grow to the size it wants to be,” Sternlicht said on the Property Play podcast in November.

Bauer noted that all the companies involved, including Oracle, have huge businesses outside of AI and (with the exception of Oracle), they all want to own their own properties. And so far, for data centers, they own about half.

“They don’t think they’re going to walk away from these leads in the markets,” he said.