Chicago Data Center Summit Preview: CBRE’s Todd Bateman Sees More Institutional Capital Interested in Data Centers

Mar 12, 2018
by Josh Anderson

CHICAGO, IL — Todd Bateman leads CBRE’s Data Center Solutions (DCS) efforts to service and advise owners and operators of data centers and other Mission Critical real estate. As the leader of the DCS’s Agency Practice for North America, Todd is able to bring CBRE’s market knowledge and intellectual capital to this asset class. As a member of the DCS executive committee, Todd implements new policies while providing clear direction for the group’s ongoing team efforts. For the last seven years, Todd has spent his time helping the world’s largest providers of Mission Critical space with the acquisition, disposition, leasing and marketing of their data center assets nationally and globally. Todd will be a featured speaker at at CapRE’s Seventh Annual Great Chicago Data Center Summit on March 22. In anticipation of the event, we caught up with him to learn his thoughts on the national data center arena, today and tomorrow.

CapRE: Thanks for chatting with us today, Todd. Please share with our readers how things are going at CBRE?

Bateman: I lead CBRE’s efforts on behalf of owners, investors, and operations in the data center space. We have projects all around North America. We’re actively engaged to find tenants, some facilities are leased, some are sold. That’s a big chunk large portion of my business. Another big chunk major component is advising investors in the data center space on big investment opportunities.

CapRE: And what’s the most exciting thing going on the space right now?

Bateman: Right now, by far the most exciting aspect is the amount of institutional capital that is interested in getting into the space. There has been a perennial group of investors and operators who have been omni-present and we are starting to some meaningful new group become active. We are seeing a large amount of institutional investors showing increased interest in the space.

CapRE: Why is that happening now?

Bateman: Well it’s due to a global progression of a business which has historically been very niche. It’s been very specific and has required a deep level of focus to get into. As for the REIT sector, the REITS in our business have been growing to the sizes that they have, and it has necessitated for the broader market to start paying more active attention to the business. It’s also a function, perhaps more importantly, that our world is becoming more digitized. The need for infrastructure, which our data centers provide, has become more in vogue.

CapRE: And where do you see the sector going in the next few year?

Todd Bateman, North American Agency Practice Leader, Data Center Solutions, CBRE

Bateman:: I’ve been bullish on the space since I got into the business in 2007. I’ve seen nothing recently that makes me think there’s not going to continue to be growth in the industry and the sector for the intermediate term. It’s playing out in ways that are not always easy to predict, because it’s not cause and-effect market compared to other real estate assets classes. But on a day by day, quarter by quarter basis, it’s becoming more sophisticated, more efficient, and more compliant with norms seen across many other real estate asset classes.

CapRE: So despite this confidence, what obstacles to new entrants to the market face as they try to get a foot in the door?

Bateman: There are a number of obstacles. The specificity, the nuance of a niche business in which it doesn’t lend itself well to other real estate classes is real. And the blend of tech in real estate is too – there is a perennial debate on whether data centers are technology or real estate. The cost associated with the facilities is substantial as compared to any real estate asset class as well. And the omnipresent fear of some disruptive technology, that would invalidate the need for data centers exists too. That last one could be great from a societal perspective, if there was something that would make things more efficient in terms of energy. But I’m not optimistic that there will be a massive technology upheaval that would undermine the need for data centers in the intermediate term. Perhaps in the long term, but perhaps cold-fusion will be figured out too.

CapRE: So how do you help clients navigate these challenges?

Bateman: People come in with a lot of pre-conceptions, being really optimistic. We see them attracted by the highline numbers, which are achievable, but they don’t come out without other trade-offs such as risk and barriers to entry. It’s our job to help them understand both the upside and the challenges associated with it. Nothing is easy and nothing is free. That’s life. Re-aligning people’s expectations to what is achievable and what needs to be done for success is a primary function of what we do on a daily basis.

CapRE: And how about geographically – are you excited about any markets over others?

Bateman: At the end of the day, it’s still about the core markets. The idea of frontiering new data center locations has some merit, and we spend time there. But the large gravity of need and opportunity still resides in the primary Tier I markets. The Edge and non-Tier I markets are interesting, but for different reasons. A lot of people want to extrapolate on the value of the Edge markets, but I personally think that the Core markets are at this point the best place to spend considerable time.

CapRE: Thank you for your time today, Todd. We’ll see you at CapRE’s Seventh Annual Great Chicago Data Center Summit on March 22, 2018.

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