TRG | The Bottom Line – 6/2

A recent article from Data Center Frontier highlighted a changing and expansive view and use of commercial spaces. The article discussed Amazon Web Services intention to demolish nine buildings in Loudoun County to create a new cloud campus. For data centers, location matters, and a growing digital economy needs physical space. Data Center Frontier had made a trends forecast in 2020, with one of those being, “As data tonnage reinforces the importance of proximity, we’ll see more ‘knock-down’ expansion projects, as developers buy adjacent properties and demolish existing buildings to create new data center campuses. In major cloud corridors, economics will make data centers the most valuable use for real estate.” Amazon is slated to replace nine office buildings with data centers that may encapsulate more than 900K square feet of data center space. This supplements a growing cloud cluster in the Northern Virginia area, with multiple data center owners. As TRG has outlined in recent reports, we believe non-res construction has and will continue to be fueled by sectors and structures other than office buildings or “traditional” commercial spaces. Money is leaving the office and general commercial real estate sector and is flowing into the manufacturing/industrial sector, technology/communications, and healthcare. The redevelopment and repurposing of commercial property by Amazon is a good example of a trend we believe will continue for many months and even years. A whole host of construction-related companies stand to benefit from this trend, including equipment rental, heavy materials (aggregate, cement, concrete), E&C, and contractors servicing the construction and maintenance of phase of structures.