Rather than betting on a winner in the AI revolution, some family offices are backing the infrastructure behind it

Helen Burnett-Nichols • Canadian Family Offices

Published Jan 27, 2025

The growth of generative artificial intelligence (AI) tools and cloud computing applications has sparked a rapid digital transformation. The race is on to create more data centres. These physical facilities are critical for housing, processing, and distributing the mass of information that is growing exponentially.

Investing in the digitization trend is appealing to family offices, just as it is to other investors. However, rather than trying to pick the next AI sensation, many are opting for private real estate or infrastructure investments in the data centre space. This approach is viewed as a longer-term play.

The Growth Story

The demand for data centres worldwide has been strong in recent years. However, it is expected to surge further in the second half of the decade. If the current trends hold, a recent analysis from McKinsey indicates that global demand for data centre capacity could increase annually by 19 to 22 percent from 2023 to 2030. This surge could lead to an annual demand of 171 to 219 gigawatts (GW), primarily driven by the need for AI-ready capacity. Presently, demand is around 60 GW.

“To avoid a deficit, at least twice the data center capacity built since 2000 would have to be constructed in less than a quarter of the time,” the report states.

Colocation data centres—spaces rented out to third parties for networking or server storage—are projected to grow at a compound annual growth rate of 6.6 percent through 2030, according to ABI Research. The highest concentration of new data centres is expected to be built in China, the U.S., Germany, Japan, Australia, Canada, the U.K., and France.

“We would view data centre real estate as a safer way to play the insatiable demand for data or the rise of AI than the big win/lose bets others are taking.”

— Joseph Abramson

Globally, big cloud service providers like Amazon Web Services, Microsoft Azure, and Google Cloud are driving demand for hyperscale AI-ready data centres. They are rapidly constructing these facilities. Due to supply constraints, this also opens up opportunities to partner with or lease space from colocation providers.

Private equity partnerships are increasingly crucial. Several large infrastructure investors have participated in significant deals to fund data centre initiatives in recent years.

As noted by Synergy Research Group, the value of global data centre-oriented M&A transactions reached a new record of $73 billion in 2024. This includes company acquisitions, individual data centre purchases, minority equity investments, joint ventures, share sales, and land acquisitions for development.

Interestingly, private equity now accounts for approximately 80 to 90 percent of closed deals in this sector, up from 54 percent in 2020.

How Family Offices Are Investing in Data Centres

“It’s a very fascinating space,” says Robert Janson, co-CEO and chief investment officer at Westcourt Capital in Toronto. He sees how much AI, data centres, computing power, and connected areas will shape our lives. This trend, he believes, will accelerate.

In Janson's view, family offices should invest in the broader AI space strategically. Rather than picking stocks, his approach focuses on recognizing long-term growth through private infrastructure investments in data centres.

“I don’t want to be picking Nvidia versus ChatGPT versus DeepSeek,” he remarks. “Our conclusion is to partner with the biggest players in the world to help build out and furnish these companies with the power and data centres that they require.”

Westcourt Capital has teamed with Switzerland-based Partners Group. This global private markets firm provides families with access to infrastructure investment expertise, specifically targeting data centre deals. “These are multi-billion-dollar projects to move the needle a little bit, and I think it’s an interesting way to play it,” Janson adds.

“Data centre investment is not an undiscovered concept,” says Joseph Abramson, co-chief investment officer at Northland Wealth Management. “Some data centre REITs have been around for over 20 years. However, we prefer private, rather than public, exposure to the sector in the current climate.”

Northland has invested in data centres in the U.S. and Europe through private equity investments. They lean towards those with big land banks, access to electricity, and servers.

“At the moment, we believe that good returns can be achieved if you own the land and have the necessary servers. Those are both constraints,” Abramson explains. “In addition, access to electricity and cooling is crucial.”

Managing Risk in Data Centre Investment

A long-life asset such as a data centre can be a reasonable fit from a family office perspective, explains Greg Nott. He is the senior vice-president and chief investment officer at Northwood Family Office in Toronto. Northwood’s goals-based investment model often leads clients to adopt a multi-generational time horizon.

While data centres are a growing area with potential returns, Nott mentions that his family office does not invest directly in projects. Instead, they are exposed to the sector through some private market fund mandates.

“We treat it as just one exposure within an infrastructure or real estate allocation,” he says. “We don’t aim to have a dedicated allocation specific to data centres, as there are certainly risks involved.”

One of these risks includes the strain on the power grid due to ongoing data centre growth. The investment needed to enhance supply grows as fast as demand. Some hyper-scalers are even considering building their own power supplies.

The International Energy Agency highlights that hyperscale data centres have power demands of 100 MW or more. Their rapid growth could outstrip the ability to strengthen grids or generation capacity, placing pressure on local power networks.

Concerns about overbuilding and overinvestment have also been raised, says Nott. In January, the China-based AI startup DeepSeek disrupted the market by introducing a lower-cost, less energy-intensive model. This sparked discussions on whether long-term investments in data centres need to be as large as initially believed.

Abramson believes potential constraints in data centre construction could arise from increased risk aversion, local zoning issues, or challenges with electricity access or storage in specific locations.

However, he doesn’t see the DeepSeek development or any AI disruptor diminishing the demand for data centres. “It increases the democratization of AI and brings us closer to general intelligence—essentially a true thinking machine, which we do not currently possess,” he clarifies. “Like all tech revolutions in the past, more efficient AI like DeepSeek will lower prices, thus increasing demand.”

Ultimately, the long-term outlook regarding AI and cloud storage demand makes data centre investments appealing for some family offices, especially considering the alternatives in the current market.

“That is where I think family offices have an advantage,” Janson concludes. “It’s very patient capital, and that can be very powerful when allocated to the right sectors, such as this.”

Original Article