How to Invest in Data Centers (Jeffrey Kanne, National Real Estate Advisors)

Technology can be enormously disruptive to commercial real estate. Remote work is responsible for the global devaluation of office properties. Artificial intelligence (AI) is already changing the way we live and work.

So what will be the effect of AI on institutional investment strategies?

To get at some answers, AFIRE CEO Gunnar Branson talked to one of his favorite futurist investors, Jeffrey Kanne, president and CEO of National Real Estate Advisors, an AFIRE member firm and investment manager specializing in a build-to-core strategy, developing and managing large-scale, urban commercial and multifamily projects for its institutional client accounts.

“The advent of AI as a technological tool is going to greatly increase the rate of change,” Kanne tells Branson. “I’m very nervous about where you can place money and think it’s safe.”

The best opportunity for investment, Kanne believes, is in data centers that provide consistent power and temperature-controlled environments for the Googles, OpenAIs and Microsofts of the world.

With that in mind, Kanne and Branson discuss how investors can enter the data center market.

“It’s not rocket science,” Kanne says, while outlining potential pitfalls and barriers to entry for new operators. “It’s incumbent on all of us as investors to think about what the world will be like in five years, ten years, fifteen years,” Kanne says. “When I look ahead, data centers are a good place to focus on.”


AFIRE Podcast 2024.04 outline
00:00 Introduction
01:18 How can commercial real estate investors invest in future trends? And in what sectors will those investments be future proof?
04:09 Energy sources, and how important they are for energy growth in the current context.
04:41 How should we, as CRE investors, think about AI? How to satisfy AI’s energy demands?
06:25 Why we’re in the very infancy of the development of AI.
08:04 Why data centers are so compelling for commercial real estate investors.
08:50 How can investors develop data center strategies? How can they get in?
11:29 When people do invest in data centers, where are the risks? Where are the pitfalls?
13:32 Why operator reputation is the biggest barrier to entry in the data center market.
15:18 Why the data center business is not as technologically forbidding as it sounds.
17:16 The impact on data centers of US government infrastructure investments.
20:20 We’re approaching a new age that sees the energy sector as a growth environment.
21:27 The challenge of managing AI-caused social change.
23:33 Why Jeffrey Kanne is positive about the coming era of rapid technological change.
24:03 Why Jane Jacobs felt Karl Marx got it wrong.
25:00 Why America’s flexibility to change, and disaggregation of power, will help.
26:00 Will AI bring in an age of Universal Basic Income?