Blackstone Inc., the world’s largest private equity firm, is making a significant bet on the AI revolution with its $10 billion takeover of data center operator QTS in 2021. The company is fueling rapid growth at one of the top landlords for tech giants by bankrolling the development of massive structures that will handle crucial computing needs, while also reshaping communities across America.
Off a highway in Phoenix, cranes tower over a stretch of land larger than 60 football fields. The first of five hulking bunkers are under construction, while engineers are plotting another complex on 400 acres, some three times the footprint of the Mall of America, all but erasing the land’s farming roots. If all goes as planned, both sites will be home to thousands of computers churning mountains of data, powered by the energy needed for hundreds of thousands of homes.
Blackstone’s strategy for real estate follows its classic playbook, identifying rising needs for properties and directing billions of investor dollars to build giant landlords poised to capture big rents and market share. In this case, the shortage centers on the buildings needed to sustain the digital workings of modern life, and since the QTS acquisition, demand has exploded.
With the artificial intelligence boom taking hold, tech giants like Meta and Microsoft are increasingly relying on landlords for the space and electricity to run machines that train software to predict patterns from a deluge of text, images, and videos. Blackstone now sees QTS as potentially one of the best investments in its history.
The company has leveraged its land reserves to profit from a short supply of space and power in key markets. QTS has $15 billion of properties in development, up from $1 billion at the time of its acquisition, and has become North America’s largest provider of leased data center capacity based on megawatts under contract, after ranking No. 4 just three years ago, according to research firm datacenterHawk.
However, the vast amount of resources required makes expanding further more complicated. Power is already a major concern, with data centers consuming significant amounts of energy. Blackstone’s ambitious venture into the AI-driven data center market is reshaping the real estate landscape, and its success with QTS could mark a significant milestone in the company’s history.
