Investors Shift Billions to Data Centers Amid AI Boom

A fundamental change is reshaping the global real estate market as investors move capital away from traditional assets like office towers and shopping malls. Instead, they are pouring billions into the development of data centers, the physical infrastructure that powers cloud computing and artificial intelligence.

This pivot to what some experts call "invisible" property is driven by the massive computational demands of AI, creating unprecedented demand for energy, cooling, and digital infrastructure. While investor appetite is at an all-time high, the sheer scale of these projects is beginning to strain traditional financing sources, creating a potential funding gap in a rapidly expanding sector.

A New Era for Real Estate Investment

For decades, the most prized real estate assets were tangible structures that defined city skylines. Now, the focus is on the unseen infrastructure that underpins the digital economy. This trend was highlighted during a panel at the Milken Institute Asia Summit in Singapore.

"The world of real estate is changing from what I’d call the ‘visible’ to the ‘invisible,’" said Kishore Moorjani, CEO of CapitaLand Investment’s alternatives and private funds team. "[It’s] everything we can’t see but we use: the cloud, as we like calling it, lives in the data center. That’s what’s driving the value shift."

This sentiment is strongly supported by market data. According to a 2025 investor survey from real estate firm CBRE, an overwhelming 95% of major global investors intend to increase their financial commitments to the data center sector.

The survey, which polled 92 major investors, revealed a significant rise in planned capital allocation. In 2025, 41% of respondents plan to invest $500 million or more in equity into data centers, a substantial increase from 30% in the previous year.

The AI Boom Fuels Unprecedented Demand

The primary catalyst for this investment surge is the rapid adoption of artificial intelligence. AI workloads require immense computing power, which in turn demands vast amounts of electricity, advanced cooling systems, and high-speed networking infrastructure housed within specialized facilities.

Investors are actively rebalancing their portfolios to capitalize on this trend. Stuart Crow, CEO of APAC capital markets at JLL, noted that capital is being reallocated away from traditional sectors and into alternative assets.

"A big part of that is data centers, and now battery storage and infrastructure that’s associated with that," Crow stated during the summit. This strategic shift includes investments in emerging markets, with Goodwin Gaw, managing principal at Gaw Capital Partners, confirming his firm's focus on China's growing data center market.

A Widening Funding Gap Emerges

While investor interest is strong, the enormous cost of building these facilities is creating new financial challenges. The panelists at the Milken Institute event warned that the pace and scale of data center construction are straining the capacity of traditional lenders.

The High Cost of Digital Infrastructure

Building a modern data center is a capital-intensive endeavor. According to research from Columbia Business School, constructing a hyperscale facility—a massive data center designed for large-scale computing—costs approximately $12 million per megawatt of power capacity.

• A typical modern hyperscale data center ranges from 150 to 300 megawatts.
• This places the construction cost for a single facility between $1.8 billion and $3.6 billion.
• Newer AI-focused facilities, which can exceed 1 gigawatt (1,000 megawatts), will require multi-billion-dollar investments.

"Banks are certainly challenged around their data center exposures, given the sheer volume and quantum of the build that’s going on," Moorjani explained. "I think increasingly the banks are starting to feel a little bit strained."

The central concern for the industry is whether enough capital exists to fund this global build-out. "So the biggest question mark for the real estate community is: is there enough capital at the moment?" JLL's Crow asked.

Impact on Traditional Commercial Real Estate

The rise of AI and the focus on digital infrastructure could also reshape the landscape for conventional real estate. As companies integrate AI, they may reduce headcount or change how they utilize physical office space, potentially softening demand in the commercial sector.

This trend aligns with broader market forecasts. Property consultancy Savills recently adjusted its outlook for 2025, projecting an 8% rise in global commercial real estate investment. This is a significant downgrade from its previous forecast of 27% growth.

The Savills report identified several obstacles facing traditional developers, including rising construction costs, tighter financing conditions, labor shortages, and complex regulatory environments. Despite these headwinds, the report noted that large pools of undeployed capital remain, and major institutional investors have not abandoned real estate as a core asset class. The key difference is where that capital is now being directed.