The main part of this thesis will be a comprehensive empirical analysis of the performance, risks and portfolio benefits of data center REITs relative to other commercial REIT sectors and major financial asset classes. The focus will be on the comparison of REIT sectors respectively property types, as this topic has rarely been dealt with in literature so far.
Following research questions were formulated:
How do investments in data center REITs compare to investment in other REIT sectors and major financial asset classes in terms of risk and return?
How do data center REITs act in a portfolio and which benefits can be gained from including them in a portfolio of different REITs respectively different financial assets?
Due to the facts that data center REITs specialize in in a property type, which requires tremendous specific knowledge and the simultaneously very supporting settings stated above, the following hypotheses will be examined:
Data center REITs achieved higher returns but also higher risk than other REIT sectors and financial assets in the past.
Data center REITs play a substantial role in a portfolio, that can be at-tributed in particular to the outperformance of other REIT sectors and financial assets.
Table of Contents
- 1. Background and Overview
- 2. History of Data Centers
- 3. Basic Characteristics of Data Centers
- 3.1. Shell and Core
- 3.2. Technical Fit Out
- 3.3. Site Requirements
- 4. Data Centers Through a Real Estate Lens
- 4.1. Data Center Types
- 4.2. Real Estate Specifics
- 4.3. Data Center Investment
- 5. Introduction to Data Center REITs
- 6. Literature Review and Data Basis
- 6.1. Excursus: Total Return
- 6.2. Literature Review on the Performance of Data Center REITs
- 6.3. Data Basis
- 6.3.1. Data Center REITs Index
- 6.3.2. FTSE NAREIT US Real Estate Index Series
- 6.3.3. 1-Month Treasury Rate
- 6.3.4. Stocks and Bonds
- 6.3.5. Fama/French Research Factors
- 7. Performance Analysis
- 7.1. Data Center REITs vs. other REIT Sectors
- 7.1.1. Descriptive Analysis: Total Return, Risk and Sharpe Ratio
- 7.1.2. CAPM and Carhart Four-Factor Model
- 7.2 Data Center REITs vs. Stocks, Bonds and Cash
- 7.1. Data Center REITs vs. other REIT Sectors
- 8. Portfolio Benefits
- 8.1. Theoretical Foundations
- 8.1.1. Modern Portfolio Theory
- 8.1.2. Overall, Diversification and Return Benefits
- 8.2. Correlations
- 8.3. Data Center REITs in a REIT Portfolio
- 8.3.1. Portfolio Optimization
- 8.3.2. Overall, Diversification and Return Benefits
- 8.4. Data Center REITs in a Mixed-Asset-Portfolio
- 8.4.1. Portfolio Optimization
- 8.4.2. Overall, Diversification and Return Benefits
- 8.1. Theoretical Foundations
- 9. Summary and Limitations of Empirical Findings
Objectives and Key Themes
This master's thesis evaluates data centers as an asset class, focusing on specialized REITs. The main objective is to analyze the performance of data center REITs and their potential benefits for portfolio diversification. * Performance analysis of data center REITs. * Comparison of data center REITs with other REIT sectors and asset classes. * Examination of portfolio diversification benefits. * Assessment of risk and return characteristics. * Evaluation of data center REITs within the context of modern portfolio theory.Chapter Summaries
1. Background and Overview: This chapter provides a general introduction to the topic of data centers and their growing importance in the modern economy. It sets the stage for the subsequent chapters by outlining the key aspects of data centers and their relevance within the real estate investment landscape. The chapter likely introduces the concept of data center REITs and their role in the market, providing a broad context for the research undertaken in the thesis.
2. History of Data Centers: This chapter delves into the historical evolution of data centers, tracing their development from early mainframe computers to the sophisticated facilities of today. It likely explores key technological advancements and their influence on the design and functionality of data centers, highlighting significant milestones and trends that have shaped the industry. The chapter may also discuss the growing demand for data center space and the factors driving this growth.
3. Basic Characteristics of Data Centers: This chapter focuses on the fundamental aspects of data center design, construction, and operation. It likely covers various key components, including shell and core infrastructure, technical fit-out, and site requirements. The chapter provides a detailed overview of the technical specifications and considerations involved in building and managing a successful data center. It will likely explore the differences between various types of data center designs and their suitability for different purposes.
4. Data Centers Through a Real Estate Lens: This chapter analyzes data centers specifically through the lens of real estate investment. It likely explores different types of data centers, their unique real estate characteristics, and the investment considerations involved. This includes analyzing market dynamics, investment opportunities, and potential risks associated with data center investments. The chapter may delve into specific investment strategies and approaches that are relevant to the data center sector.
5. Introduction to Data Center REITs: This chapter introduces the concept of Real Estate Investment Trusts (REITs) specializing in data centers. It will likely explain the structure, operations, and investment characteristics of these REITs. The chapter is likely to provide a crucial bridge to connect the general discussion of data centers with the empirical analysis that follows, setting the stage for the quantitative examination of data center REIT performance.
6. Literature Review and Data Basis: This chapter presents a comprehensive review of existing literature on data center REITs and outlines the data utilized in the empirical analysis. It likely includes an overview of relevant research findings on the performance of data center REITs, total return, and other related financial metrics. The chapter meticulously details the data sources, methodology for data collection, and the justification for the chosen data sets. It ensures transparency and reproducibility of the study's methodology.
7. Performance Analysis: This chapter provides a detailed analysis of the performance of data center REITs. It likely involves a comparison with other REIT sectors and broader asset classes (stocks, bonds, cash) using various statistical methods and financial models (CAPM, Carhart Four-Factor Model). This chapter will present key findings regarding risk-adjusted returns, risk profiles, and other relevant performance metrics. It offers a critical examination of the empirical data and their implications.
8. Portfolio Benefits: This chapter explores the potential benefits of incorporating data center REITs into diversified investment portfolios. Using modern portfolio theory as a foundation, the chapter likely analyzes the correlations between data center REITs and other asset classes. The analysis likely shows how data center REITs can contribute to enhanced risk-adjusted returns through diversification. Specific scenarios and portfolio optimizations are likely presented, highlighting the practical implications of the findings.
Keywords
Data centers, REITs, real estate investment, portfolio diversification, performance analysis, risk-adjusted return, CAPM, Carhart four-factor model, modern portfolio theory, correlation, diversification benefits, Fama-French factors.
Frequently Asked Questions: Data Center REITs: Performance, Portfolio Diversification, and Investment Strategies
What is the main topic of this document?
This document is a comprehensive preview of a master's thesis that evaluates data centers as an asset class, focusing on specialized Real Estate Investment Trusts (REITs). It analyzes the performance of data center REITs and their potential benefits for portfolio diversification.
What are the key objectives of the thesis?
The main objectives are to analyze the performance of data center REITs, compare them with other REIT sectors and asset classes, examine portfolio diversification benefits, assess risk and return characteristics, and evaluate data center REITs within the context of modern portfolio theory.
What topics are covered in the different chapters?
The thesis covers a range of topics, starting with background information on data centers and their history (Chapters 1 and 2). It then delves into the characteristics of data centers from a real estate perspective (Chapters 3 and 4), introduces data center REITs (Chapter 5), and conducts a literature review and outlines the data used in the analysis (Chapter 6). The core of the thesis is the performance analysis of data center REITs, comparing them to other asset classes (Chapter 7), and exploring their portfolio diversification benefits (Chapter 8). Finally, the thesis summarizes the findings and addresses limitations (Chapter 9).
What type of analysis is performed on data center REITs?
The analysis includes a comparison of data center REITs with other REIT sectors and broader asset classes (stocks, bonds, and cash). Statistical methods and financial models such as the Capital Asset Pricing Model (CAPM) and the Carhart Four-Factor Model are employed to assess risk-adjusted returns and risk profiles. The analysis also examines correlations and explores portfolio optimization strategies using modern portfolio theory.
What are the key findings regarding the performance of data center REITs?
The specific findings regarding the performance of data center REITs are detailed in Chapter 7. The document preview only states that the chapter presents key findings on risk-adjusted returns, risk profiles, and other relevant performance metrics.
How are the portfolio benefits of data center REITs examined?
The portfolio benefits are investigated by analyzing the correlations between data center REITs and other asset classes, using modern portfolio theory as a framework. The analysis likely demonstrates how data center REITs can enhance risk-adjusted returns through diversification. Specific portfolio optimization scenarios are also explored.
What data sources are used in the analysis?
Chapter 6 details the data sources used. The preview mentions a Data Center REITs Index, the FTSE NAREIT US Real Estate Index Series, 1-Month Treasury Rate, stocks and bonds data, and Fama/French research factors.
What are the key limitations of the study?
The limitations of the empirical findings are discussed in Chapter 9. The preview does not specify these limitations.
What are the keywords associated with this thesis?
Key terms include: Data centers, REITs, real estate investment, portfolio diversification, performance analysis, risk-adjusted return, CAPM, Carhart four-factor model, modern portfolio theory, correlation, diversification benefits, Fama-French factors.
- Quote paper
- Tobias Hagenah (Author), 2020, Data centers as an asset class. Evaluation of specialized REITs, Munich, GRIN Verlag, https://www.grin.com/document/1117514
