REITs Make New Debut, the 300-billion-yuan Market Ushered in the Era of Light Assets | Jinke·Finance

Author | Wang Hanyu

Editor | Zheng Huaizhou

While the pace of new product launches accelerates, the underlying asset categories of public offering REITs have expanded again.

In March this year, the first two data center REITs were successively filed for application. As REIT projects enter the stage of regular issuance, since last year, multiple REIT projects labeled as the "first of their kind" have been established, such as the first water conservancy REIT, the first heating REIT, and the first cross - sea bridge REIT.

From the initial warehousing and logistics, transportation infrastructure, energy infrastructure, ecological environment protection, municipal facilities, water conservancy facilities, etc., to later affordable rental housing, industrial parks, consumer infrastructure, and then to data centers, there are currently 10 types of underlying assets for public offering REITs in the domestic market.

Meanwhile, the investment value of public offering REITs has become more prominent. Wind data shows that as of the close on May 22, among the 58 REITs listed before January 1, 2025, 56 have achieved positive returns this year. Among them, the Hua'an Bailian Consumer REIT, which has the highest increase, has accumulated a 49.37% increase since the beginning of this year. The Huaxia Joy City Commercial REIT, Jiashi Wumei Consumer REIT, and Huaxia Capital Outlets REIT follow closely, with year - to - date increases all exceeding 40%, reaching 48.67%, 42.79%, and 41.15% respectively. In addition, a total of 8 REITs have increased by more than 30%.

So, what is the value of the data center REITs that are expected to be listed soon? Compared with the previously existing asset categories such as warehousing and logistics and shopping centers, what are the characteristics of data centers? And how should investors judge the operational quality of a data center?

01 Data Centers Enter the "Light - Asset Era"

A traditional data center is a dedicated space that provides infrastructure such as placement, power, cooling, security, and monitoring for tenants' computer systems, including servers, storage devices, network devices, etc. It is usually a physical room, a building, or a facility used to build, run, and deliver applications and services, and also to store and manage data related to these applications and services.

Schematic diagram of the structure of a data center and the interior of a server room. Source: Joint report "Insights into Investment and Value in the Data Center Industry" by Shoucheng Holdings, Zhonglian Fund, and DTZ.

In short, a data center provides cabinet hosting services to customers and charges a certain hosting service fee. That is to say, as the underlying asset of a REIT, its stable and continuous cash income comes from the hosting service fees paid by customers.

Currently, against the backdrop of the breakthrough in AI technology giving rise to popular AI applications, the market's demand for and consumption of computing hardware have further increased. As the demand for AI continues to grow, market players need to increase capital expenditures and enter the stage of reinvesting in computing power.

A public offering fund person told 36Kr that before the popular applications emerged, during the wave in 2021, a lot of investment flowed into the hardware fields such as servers, computing power, and chips. While laying a solid foundation for AI applications, there was also a phenomenon of periodic redundancy due to the mismatch between supply and demand. However, by 2025, the inventory cycle has been digested, and the explosion on the application side will greatly drive the demand for computing power in reverse.

In this process, data centers play the role of infrastructure. They provide the necessary hardware facilities for computing power, such as physical servers, storage devices, and network devices, and support the operation and optimization of computing power through resource allocation, energy management, and security assurance.

Therefore, against the backdrop of the breakthrough in DeepSeek technology and other factors driving the explosion of AI demand, the scale of data centers will also continue to grow synchronously.

According to the "Insights into Investment and Value in the Data Center Industry" jointly released by Shoucheng Holdings, Zhonglian Fund, and DTZ in December last year, since 2017, the market scale and rack scale of the data center industry in the Chinese mainland have achieved double - digit growth. It is estimated that the market scale of the data center industry in the Chinese mainland will reach 304.8 billion yuan in 2024, and the standard rack scale will exceed 10 million, both achieving a year - on - year growth rate of more than 20%.

"As the digital transformation in various regions and industries is further promoted, the market scale of the data center in the Chinese mainland will maintain a continuous growth trend," the report shows.

Number of standard racks and market scale of data centers in the Chinese mainland from 2017 to 2024F. Source: Report jointly released by Shoucheng Holdings, Zhonglian Fund, and DTZ.

In addition, data from the CCID Research Institute shows that in the first half of 2024, there were more than 250 built and under - construction intelligent computing centers in the country, and there were 791 bidding events related to intelligent computing centers, a year - on - year increase of up to 407.1%.

The aforementioned public offering fund person also mentioned that as the underlying asset of REITs, data centers benefit from the development of cloud computing, big data, and artificial intelligence, and the industry demand is on the rise. Especially against the backdrop of the rapid development of intelligent computing centers, the market demand for data centers continues to grow.

Previously, Xu Yujie, the academic director and chief economist of the United Financial Digital Economy Research Institute, wrote in an article that the data center industry belongs to a typical heavy - asset model, with a large investment scale and a long payback period. The cabinet rental rate needs to reach 50% - 60% to cover the costs, and the number of cabinets of leading enterprises often reaches tens of thousands, resulting in huge capital expenditure pressure.

Public offering REITs provide a low - cost financing channel for data center enterprises, promote the transformation of the industry from heavy - asset operation to a closed - loop of "investment, financing, management, and exit", and accelerate the capital return.

02 Be Vigilant Against the Risks of Technological Iteration and Concentration of Large Customers

In terms of asset quality and operation, compared with the previously filed REIT projects, data centers also have their own characteristics.

The aforementioned public offering fund person analyzed that data centers are technology - driven infrastructure. Their operation involves multiple technical fields such as power, cooling systems, and network security, and requires a professional operation and maintenance team, so the technical threshold is relatively high.

At the same time, the tenant concentration in data centers is relatively high, mostly large technology companies. The lease agreements are stable, and the possibility of lease termination is relatively low.

Take Runze Technology, the original equity holder of the underlying assets of the first - filed data center REIT, as an example. The company's main business is the traditional data center IDC business and the intelligent computing center AIDC business. The 2024 performance report shows that its largest customer accounts for 64.38% of the annual total sales, and the performance of the top 5 customers accounts for 90.82% of the total.

According to the financial report disclosed by Runze Technology at the time of listing, from 2018 to 2020, ByteDance contributed more than 50% of Runze Technology's revenue. A research report from CITIC Securities also shows that ByteDance has been Runze Technology's largest customer for many years.

Looking at the underlying assets of the first - filed data center REIT, it is specifically located in Langfang City, Hebei Province. The building has seven above - ground floors and one underground floor, with a construction area of 42,076.98 square meters and a total of 5,897 cabinets. The prospectus shows that it has a 15 - year long - term lease agreement with the Beijing Branch of China Telecom, and there are currently about 10 years remaining.

In contrast, the warehousing and logistics REITs and shopping center REITs are more cyclical and are more affected by macro - economic and consumer market fluctuations.

Therefore, the aforementioned public offering person believes that "Overall, compared with traditional warehousing and logistics and shopping center REITs, data center REITs have a higher technical threshold, stronger tenant stability, clearer policy support, and greater growth potential."

On the other hand, the characteristics of high performance contribution from large customers and long lease terms also become risk points for investing in data center REITs.

A previous study by CICC showed that data center REITs face risks such as concentration of end - customers, impact from power supply terminals, technological iteration, and stricter policies on power usage effectiveness (PUE).

Particularly, the risk of technological iteration needs to be highly valued. The CICC report analyzed that due to the uncertainty of technological innovation, and once a breakthrough innovation occurs, it often corresponds to new demands. In this case, the new demands may impact the existing data center facilities, operation models, and business processes. For example, if existing tenants put forward new asset transformation requirements when renewing their leases, it may have an adverse impact on the project's profitability.

In addition, based on the generally high tenant concentration in data centers and the often customized demands, once a tenant terminates the lease, it may result in a long vacancy period, affecting the project's operational stability.

Financial commentator Guo Shiliang also told 36Kr that due to the small number of comparable valuation projects at present, the pricing of data center REITs has a certain degree of uncertainty. The subsequent price fluctuations may be greater than those of traditional REITs.

However, public offering REITs adopt a mandatory dividend policy, which requires the income distribution ratio to be no less than 90% of the fund's annual distributable amount after consolidation. "The price fluctuations of REITs are lower than those of stocks but higher than those of bonds," Guo Shiliang said.

Moreover, compared with stock investment, the credit risk of REITs is relatively low because their underlying assets are physical projects. Therefore, in terms of project transparency and clarity, they still have significant advantages.

Looking at the overall situation, the asset categories of public offering REITs are becoming increasingly rich, still providing investors with more diversified choices. A previous research report released by Guotai Junan believes that although the new supply of public offering REITs may remain at a high level in 2025, it is expected that the valuation will rise steadily. Horizontally compared, the relative allocation value of such products is still relatively high.

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