Listen to this articlePGIM Real Estate raised $2 billion for its first Global Data Center Fund.
The Newark-based real estate investment manager announced the completed fundraise April 2. According to PGIM Real Estate, the GDCF includes capital commitments from a range of global investors. Additionally, the company said it entered into a distribution partnership with an unnamed, leading global private bank to raise global assets for the fund.
Data center activity has been a main CRE driver in recent years, as sites seek to meet space and power demands of emerging AI companies, for example, and other users.
To date, PGIM Real Estate says more than $450 million of equity capacity has been committed to data center investments across the company overall. Referencing GDCF’s strong pipeline of potential opportunities, PGIM RE said it expects it will deploy the funds’ remaining capital within the next 18 months.
According to PGIM Real Estate, the GDCF follows a build-fill-sell investment strategy focused on the low latency hyperscale segment of the global data center sector. The company says it targets opportunistic investment returns.
Massive hyperscale data centers are built for scalability and large workloads, while offering optimized infrastructure, streamlined connectivity and minimal latency.
According to Research and Markets, the global market for these facilities is projected to grow at a CAGR of 23% from 2024 to 2030, reaching $724.9 billion. The report cited the increasing adoption of cloud services; the rise of big data and AI; and demand for scalable, energy-efficient infrastructure as drivers.
Also pushing that growth: backing from major tech players, such as Amazon, Microsoft, Google and Facebook, the report said, which continue to invest heavily in developing these spaces.
Local constraints
Since its first close in July 2023, PGIM Real Estate said GDCF has developed a portfolio of geographically diverse assets in major markets worldwide, such as North America, Asia-Pacific and Europe.
CBRE’s latest North American Data Center Trend Report found the North American data center sector doubled the amount of supply under construction in 2024 from the previous year to a record 6,350.1 MW – a 12-fold increase from the 456.8 MW under construction in 2020.
Locally, data center pricing hit record levels in the Garden State in 2024, according to CBRE.
Last month, CBRE identified the New Jersey data center market as the ninth-ranked in new capacity under construction among major markets – up 13% to 142.1 megawatts. The commercial real estate services and investment firm noted record pricing levels in the Garden State – with rental rates among the highest nationwide – amid low vacancy. The national average hit a record low of 1.9% in 2024, CBRE said.
“High interest rates have not slowed down leasing activity, and pricing is at all-time high for colocation facilities due to little available supply,” said CBRE Senior Vice President Bill Hassan. “AI-related occupiers are eager to absorb space in 5-to-10-MW increments before 12 months of availability, and demand for legacy space continues to drive record-low vacancy. “
A meaningful milestone
The Global Data Center Fund’s strategy creates value by partnering with leading data center operators through asset-level joint ventures, according to PGIM RE. Owing to its deep bench of relationships, that operator-independent approach opens enticing investment opportunities in supply constrained markets, according to the company.
ESG considerations are also factored into each investment decision with a defined asset allocation to buildings with a green building certificate, PGIM Real Estate said.
A global portfolio management team manages the fund. With more than a decade of experience in the sector, Global Head of Data Center Investments Morgan Laughlin leads the group.
He described hitting the $2 billion target as an important milestone “that reflects strong investor confidence in the sector and our strategy.
“Data centers are at the heart of the digital framework that is playing an increasingly critical role across our economy and society. In line with the recognition of the importance of digital infrastructure in our modern lives, global investors are rapidly increasing their exposure to the sector,” Laughlin continued.
PGIM Real Estate is a business of PGIM, the global asset management business of Prudential Financial Inc. The third-largest real estate investment manager worldwide, PGIM RE boasts $206 billion in gross assets under management and administration, according to the company. Its professionals work in 35 cities globally.
“We see a significant opportunity to develop expertise in the data center space and create a wider digital infrastructure platform,” said PGIM Real Estate co-CEO Raimondo Amabile. “Data centers, and other associated digital infrastructure, offer a generational investment opportunity as the digital demands of our societies and economies continue to expand at an astounding pace.”
An active space
When it comes to development, CBRE said confirmed power availability – a concern locally – takes precedence over other site-selection criteria.
Notable activity in the region cited by CBRE includes an AI-related occupier signing a 70-MW powered shell lease at an Onyx Equities LLC facility. Presumably CoreWeave’s agreement for 11 NEST at The Northeast Science & Technology Center in Kenilworth, the tenant plans to invest $1.2 billion into the new data center.
Nearing completion, CoreSite expanded its regional footprint with a state-of-the-art facility in Secaucus that will offer turn-key data center space and 15 critical MW capacity. Meanwhile, QTS is building out 20 MW for an AI-related occupier in Hightstown, CBRE said.
CoreSite in Secaucus is close to completion, and QTS in Hightstown is building out 20 MW for an AI-related occupier.
