Private equity firms Blue Owl Capital and Partners Group are leading nearly $7 billion in new investments in U.S. data centers as robust demand from cloud computing and artificial intelligence has led to a significant increase in development.
Funds managed by Blue Owl, Chirisa Technology Parks and PowerHouse Data Centers executed a joint venture development agreement for large-scale data centers operated by CoreWeave. The agreement is intended as the first stage of a partnership with the capacity to deploy up to $5 billion of capital.
Meanwhile Partners Group, in conjunction with multiple global co-investors, completed a $1.9 billion equity investment to fund the development of data centers for its portfolio company EdgeCore Digital Infrastructure.
Capital flow into the data center market, already at a high level, is only expected to increase through this year, CBRE said in its mid-year North American data center report issued last month.
Investment activity was largely centered on new development, as strong tenant demand, rental-rate growth and high yields fuel a landlord-favorable market, according to the brokerage.
Robust demand from cloud computing and artificial intelligence led to a significant increase in data center construction activity in the first half of 2024, CBRE said. Despite this supply growth, the overall vacancy rate hit a record low, resulting in higher prices and sharply increased capital flows targeting the sector. Primary market vacancy rates dropped to an all-time low of 2.8% in the first half of 2024 from 3.3% a year earlier.
Virginia Developments
Blue Owl, Chirisa Technology Parks and PowerHouse’s joint venture will develop a data center for CoreWeave in 2025 and 2026 at Chirisa’s 350-acre campus near Richmond, Virginia. Further deployments in the pipeline include brownfield and greenfield campuses in New Jersey, Pennsylvania, Texas, Kentucky and Nevada.
“Blue Owl is in the process of deploying significant amounts of capital in support of large-scale data center development transactions across the U.S. and Europe,” Marc Zahr, Blue Owl's co-president and head of real estate, said in a statement.
Partners Group's latest investment in EdgeCore represents the third financing transaction in 2024 for EdgeCore, which now totals $4.24 billion raised since January.
The latest $1.9 billion capital investment will be applied toward expansion across EdgeCore’s portfolio, including the development of its recently announced data center campus in Culpeper, Virginia.
“The financial requirements for building data centers designed to meet the density specifications of artificial intelligence are staggering and demand the right combination of industry expertise and investment,” Lee Kestler, CEO of EdgeCore, said in a statement. “We are prepared to utilize this $1.9 billion investment to continue meeting the exploding demand for high-density data center space required by our hyperscale customers.”