The future of real estate is digital: How data centers and 5G are shaping the next generation of infrastructure.

Digital infrastructure and real estate are becoming more closely intertwined. The rise of data centers, 5G technology, and AI are pushing the need to use more physical space to fuel our digital lifestyles. AI alone is estimated to increase data center power by 160 percent by 2030, and new construction of data centers is helping to address the growing demand.

We tend to think of digital technologies as invisible and footprintless, but the reality is that all the data we create needs somewhere to go. Cell towers and networks require large amounts of electricity to function. As these technologies become more embedded into our everyday lives, physical real estate will be a key player in the digital future.

DigitalBridge CEO Mark Ganzi believes cell towers, small cell, and 5G networks are redefining the real estate development landscape. A global leader in digital infrastructure and alternative assets, DigitalBridge sits at the forefront of the real estate digital transformation. Ganzi recently shared insights on the Walker Webcast regarding how digital infrastructure and real estate are more interconnected than ever. Here’s how he sees the blending of telecom and real estate and the opportunities it provides real estate professionals.

Cell towers, 5G, and the real estate intersection

The transition from 4G to 5G promised faster download speeds, reduced latency, and a greater capacity to connect more devices. These upgrades were necessary to allow AI and the Internet of Things to thrive.

Real estate needed to evolve alongside these developments. With more computing power comes the need for more physical data centers to support an influx of data and devices. Given that the average data center spans about 100,000 square feet (plus additional land for fencing and security), land and zoning have become an important part of the conversation.

Beyond land and new construction, cities are exploring new and innovative ways to support technology in high-density environments. Small cell technology, for example, uses small radio antennas to improve connectivity. These wireless systems are usually attached to existing infrastructure, such as street lights or utility poles, and provide connectivity in smaller, congested areas like sports arenas or urban shopping centers.

We’re also seeing the construction of new cell phone towers, allowing the radius of coverage per tower to shrink. With 5G, coverage has shrunk from 20 miles to 0.5 miles in many areas, requiring more towers for seamless connectivity. Having more towers combats weak coverage due to buildings or landscape challenges that might interfere with signal quality while allocating fewer users to each tower, affecting coverage effectiveness.

Data centers, small cells, and cell towers require physical space, and things like zoning, geographical elements, and proximity to existing infrastructure can limit options for construction. Technology must intersect with real estate to find optimal placement and contribute to a rapidly evolving market.

Data centers as the future of real estate

Data centers are emerging as a new asset class for CRE professionals, offering opportunities for recurring income while providing an essential service to society. DigitalBridge has capitalized on this growth, underscoring the role of data centers as strategic investments just as much as they are tech hubs.

However, having enough electricity to power the data centers may be the biggest hurdle to technology adoption and accessibility. Data centers consume massive amounts of electricity, directly impacting the real estate landscape. All properties, regardless of type, need access to power and water. These needs often affect zoning and land use regulations, forcing developers to think creatively and work with local governments to advance development projects.

Still, the value of this new asset class cannot be ignored. Real estate professionals  increasingly view data centers as a real estate investment, akin to traditional commercial real estate but with far higher growth potential. Robust growth potential and accelerated demand make them a highly profitable investment and a hedge in economic downturns.

Digital infrastructure: a bipartisan effort

Ganzi served alongside the FCC commissioners during Obama’s presidency and was retained during Trump’s administration. Throughout his tenure, he asserts that digital infrastructure is a "purple" issue, supported by both sides of the political aisle.

“We have an industry where I think the aisles come together, and we recognize there's a purpose to what we do, which is providing connectivity and infrastructure for all Americans, irrespective of political affiliation,” Ganzi asserted.

One initiative is the Broadband Equity, Access, and Deployment Program, or BEAD, which is part of the Inflation Reduction Act. This program has earmarked $42 billion for rural broadband connection. Though appropriations have been slow and installations don’t happen overnight, Ganzi shares that things are moving along.

“Some of these grants are being distributed to the states. We combined a fiber tower built in Louisiana to help rural communities get connected… which was part of a $100 million grant. A $120 million grant in Nevada will build high-speed connectivity between Reno and Las Vegas to create a commerce road,”  said Ganzi.

Programs like BEAD are crucial to expanding digital and real estate growth, especially in underserved areas. Funding is available for projects like these and contributes to real estate development in both urban and rural environments.

The future of real estate and the digital economy

Real estate professionals who understand that the future of real estate is digital will be well-positioned for success in the coming decades. Data centers, 5G networks, and cloud infrastructure are critical components with a strong foothold in our everyday lives. Trends like AI and blockchain increase demand for digital real estate infrastructure.

Explore more about the role of digital infrastructure in real estate through Marc Ganzi’s appearance on the Walker Webcast. Then, reach out to W&D experts in data centers.