First Half Investor Darlings
Data centers are a new darling among investors in the first half of 2024, representing 14 percent of acquisition and disposition deals during the period, according to DLA Piper’s mid-year real estate investment trends report.
That isn’t the largest share of deals in the period—multifamily still has that distinction, followed by industrial—but data centers’ share saw the largest growth from 2023, when they represented only 4 percent, and the two years before that, when deals in the sector were nil.
That finding dovetails with a DLA Piper survey from earlier this year, which found that data centers were the most attractive asset class, up more than 20 percentage points from the prior year.
Acquisition and disposition trends. Chart courtesy of DLA Piper
Moreover, the report this spring said that data centers were an area of growth, and DLA Piper now says that it is clearly seeing this play out in its practice, with the company’s data center team handling an increasing amount of data center acquisitions and financing.
For the new report, DLA Piper surveyed over 850 acquisition and disposition agreements and over 400 property management agreements.
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Buying and selling wasn’t the only elevated metric for data centers during the first half of 2024, the report noted, finding an increase in the percentage of data center (and industrial) properties in which the project’s construction fee was 5 percent or more. Some 60 percent of such deals had a fee of 5 percent or more, while 40 percent were in the 3 percent to 4 percent range.
Other findings
The report found that office deals, still far down from before the pandemic, actually gained a little grain in the first half of 2024, coming in at 9 percent, compared with 7 percent in 2023. In 2019, office represented fully a quarter (25 percent) of acquisitions and dispositions, the DLA Piper report found.
Retail, also 25 percent of acquisitions and dispositions in 2019, but crashing down in 2020, saw a small downtick between 2023 and ’24, from 9 percent to 8 percent. Industrial has been fairly consistent in terms of acquisitions and dispositions in recent years, DLA Piper explained: 20 percent in 2024, the same as in 2022 and 2020, and only a little down from 21 percent in 2023.
Longer representation and warranty survival periods in commercial real estate deals was another trend that the report found.
A survival period is the time limit during which claims may be brought for breaches of reps and warranties, with a 270-day survival period appearing in 45 percent of transactions and a 365-day or longer survival period appearing in 21 percent, according to the report. Shorter survival periods, especially those of 180 days, continued to decline, down in frequency from 33 percent to 29 percent.
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