79% of Global Data Center Capacity Faces Elevated Climate Risk
Why this matters
The finding that nearly 80% of global data center capacity is exposed to elevated climate risk underscores a growing challenge for institutional investors in US commercial real estate, particularly within the industrial and tech-driven logistics sectors. Data centers have become a critical infrastructure asset class, attracting significant private-equity and fund capital due to their resilient cash flows and structural demand from cloud computing and digital services. However, this concentration in climate-vulnerable locations signals a potential recalibration of risk assessment frameworks. For allocators and lenders, the research highlights the necessity of integrating climate resilience into underwriting and portfolio construction. Elevated exposure to flooding, extreme heat, wildfires, and other environmental hazards could translate into operational disruptions, increased insurance costs, and asset devaluations. This is especially pertinent as regulatory scrutiny and stakeholder expectations around environmental, social, and governance (ESG) factors intensify. Moreover, the data center sector’s geographic clustering in high-risk zones may prompt capital to shift toward more diversified or climate-resilient markets, influencing future acquisition strategies and debt pricing. The findings serve as a cautionary signal that climate risk is no longer peripheral but central to the underwriting and management of industrial real estate assets tied to digital infrastructure.
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New research from First Street finds the world's largest and fastest-growing data center markets are concentrated in locations exposed to flooding, extreme heat, wildfire, wind and drought risk. NEW YORK, June 18, 202…
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