Chasing A Development Boom, Investors Are Turning Their Backs On Existing Data Centers

Data center sales have plunged this year, even as construction surges and capital pours into new projects over existing assets — a trend that may leave investors overlooking prime acquisition opportunities.

North American data center sales dropped more than 50% year-over-year in the first half of 2025, with total transaction volume under $1B, CBRE reports. The slowdown comes even as investor appetite for the sector remains near record highs and capital commitments stay strong.

Most investment in the data center sector is flowing to new development rather than existing assets as the industry races to deliver what could be $7T in new build-out to meet artificial intelligence-driven demand from the world’s largest tech firms by decade’s end.

Industry leaders at Bisnow’s DICE: South event in Dallas this month warned that investors overlook data center acquisitions at their own peril. They see profit potential in upgrading and expanding older facilities to meet modern tenant needs, as well as in buying newer, fully leased properties — a segment they expect to take a growing share of the investment landscape in the years ahead.

“We think it's being overlooked,” said StratCap Data Centers Managing Director Bryan Marsh, who indicated his firm bought close to $1B in existing U.S. data center assets late last year.

“We see opportunities not only on the development front but also in acquisitions,” he said. “We're very bullish on it.”

For now, most digital infrastructure capital is chasing new builds over existing facilities. A CBRE investor survey released this month found 62% are targeting opportunistic new development, while just 7% favor acquiring stabilized data center assets.

There’s good reason for the focus on new builds, said Fentress Boyse of Partners Group, whose data center holdings include hyperscale developer EdgeCore Digital Infrastructure. Demand is outpacing supply, with vacancy in major markets near zero, and much of the inventory hitting the market during the building boom offers slim margins that make acquisitions a tough sell.

Many data centers built in the past five years are single-tenant facilities on long-term leases to tech giants like Amazon, Microsoft and Google. While they offer bondlike income, rising interest rates have further narrowed margins, leaving little room to grow revenue over the life of the lease. As a result, investors are gravitating toward higher-risk developments in search of better yields.

“You want to be building, not necessarily buying, at least from our point of view,” Boyse said.

“When you make an acquisition, you generally need to grow it in one way or shape or form, and that may not be possible against the market backdrop that we have today.”

Still, some investors see untapped potential in asset acquisitions despite current market trends.

Acquisitions may not pencil out for hyperscale-focused investors like Partners Group, but it is a different story for firms targeting sub-100-megawatt assets, said Jeffrey Moerdler, a longtime data center and telecom attorney at Mintz.

In that segment, buyers can find older facilities ripe for value-add upgrades, from boosting power capacity to modernizing cooling and electrical systems to handle today’s information technology workloads.

For the right buyer, these deals can offer advantages over greenfield development, Moerdler said, including faster revenue generation and fewer permitting or entitlement hurdles from community opposition.

Many of these opportunities come through sale-leaseback deals, often with financial institutions and other large enterprises that own their own data centers. As more computing shifts to the cloud, these legacy facilities become costly to run and often sit largely empty.

A sale-leaseback lets the enterprise keep its IT infrastructure in place, while the new owner can upgrade and lease the unused capacity — and potentially expand the site further.

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It is a strategy StratCap’s Marsh said his firm recently employed in Toronto, buying a corporate data center that was only one-third occupied and partnering with a utility to add 25 MW of capacity.

Several DICE: South panelists said the market has yet to fully capitalize on this approach.

“There's lots of untapped opportunities out there,” Moerdler said. “A lot of large companies still have data centers on their books that may not be the best use of their resources and may not be fully utilized. It’s a chance to get independent third-party management that knows how to operate a data center efficiently and let the original owner still have some control over its own space but get it off its balance sheet.”

Sales of stabilized hyperscale data centers are rare today, but that could change within 24 months, said Vardahn Chaudhry, senior vice president of asset management at American Real Estate Partners’ PowerHouse Data Centers.

A wave of large, single-tenant facilities preleased to Big Tech is expected to hit the market over the next three years, and many developers behind these projects don’t plan to hold or operate them long term.

These will be motivated sellers, Chaudhry said, and the low-risk, low-yield profile will appeal to certain investors.

“In 2027 and 2028, there will start to be a big buying opportunity for those who are looking to buy stabilized assets that are throwing off cash flow, that look like bonds, and that have a traditional credit tenant lease with some of the best credit out there,” Chaudhry said. “There will be an opportunity for capital to step into these assets.”

Hyperscalers like Microsoft and Google could eventually sell portions of their self-developed data center portfolios through sale-leasebacks, Boyse said. While far from certain, such a move would be a paradigm shift for the industry — and not without precedent.

Boyse and Moerdler said the hyperscale market could mirror the antenna and tower sector a decade ago, when telecom carriers sold off the tower portfolios they had built over the years as bundled assets.

Boyse said some companies have eventually decided they were better off letting others own and operate certain data center assets.

“Practically, I don't know how all that money would come together, but there is generally a lot of capital available for this sector,” he said.

Contact Dan Rabb at dan.rabb@bisnow.com