Wall Street is pitching data centers as a major real estate bet. The risks are piling up
Wall Street firms are increasingly packaging data center infrastructure as public and private investment opportunities, led by Blackstone's new data center REIT and potential offerings from Blue Owl and Brookfield. The investment case faces growing political opposition, state moratoriums in New York and Texas, grid constraints and project-specific risks, including delays surrounding Oracle's Project Jupiter in New Mexico.
Investment firms are seeking to capitalize on demand for AI infrastructure by bringing data center assets to public markets. Blackstone launched the Blackstone Digital Infrastructure Trust, while Blue Owl is reportedly considering a public REIT and Brookfield listed its data center services provider, Csquare, as a separate trading vehicle. Equinix and Digital Realty also remain major publicly traded data center operators. Blackstone CEO Nick Pell said the fund is targeting stabilized facilities in established markets such as Northern Virginia and Dallas, although the trust's shares have declined since its debut.
The sector is facing increasing political and operational risks. New York and Texas enacted moratoriums on new hyperscale data center approvals, while Texas Gov. Greg Abbott ordered a halt to new approvals and called for a grid-connection audit. Oracle issued a force majeure notice related to Project Jupiter, a New Mexico data center campus developed by Blue Owl, citing regulatory hurdles and local opposition while maintaining that the project remains on track. Analysts and finance experts cited opposition, electricity availability, construction delays, liquidity constraints and AI-market volatility as risks for investors.