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, and the race is on to create more and more data centres—the physical facilities critical to housing, processing and distributing a mass of information that is growing exponentially.
Investing in the digitization trend is compelling for family offices as for other investors. But instead of trying to pick the next AI sensation, many are looking to private real estate or infrastructure investments in the data centre space as a longer-term play.
The growth story
The demand for data centres worldwide has been robust in recent years, but it is expected to surge further through the second half of the decade.
If current trends hold, a recent McKinsey analysis shows that global demand for data centre capacity could rise at an annual rate of between 19 and 22 per cent from 2023 to 2030, reaching an annual demand of 171 to 219 gigawatts (GW), led primarily by demand for AI-ready capacity. Current demand sits around 60 GW.
“To avoid a deficit, at least twice the data center capacity built since 2000 would have to be built in less than a quarter of the time,” says the report.
Colocation data centres—space rented out to third parties for networking or server storage—are expected to grow at a compound annual growth rate of 6.6 per cent to 2030, says ABI Research. The most data centres are 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.
Globally, large cloud service providers like Amazon Web Services, Microsoft Azure and Google Cloud are driving demand for hyperscale AI-ready data centres and are rapidly constructing these facilities, says McKinsey. Because of supply constraints, there are also opportunities to partner with, or lease space from, colocation providers.
Across the board, private equity partnerships are proving crucial, with several large infrastructure investors entering into large deals to fund data centre initiatives over the last few years.
As Synergy Research Group notes, the value of worldwide data centre-oriented M&A deals that closed in 2024 reached a new record of $73 billion. That includes company acquisitions, acquisitions of individual data centres, minority equity investments, joint ventures, share sales and acquisition of land for development.
Private equity, says Synergy, now accounts for some 80 to 90 per cent of closed deals in the sector, up from 54 per cent 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. “We can see how much—whether it be AI or data centres or data unto itself or computing power or everything else that comes with it—will continue to shape our lives. That’s certainly not going to change. If anything, it’s going to accelerate.”
The crux of the issue, says Janson, is how family offices are investing in the broader AI space. In his case, the approach is not trying to find the next hot stock, but rather recognizing the sector’s long-term growth prospects via private infrastructure investments in data centres.
“I don’t want to be picking Nvidia versus ChatGPT versus DeepSeek,” he says. “Our conclusion is, 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 partnered with Switzerland-based Partners Group, a global private markets firm, to invest in a fund that provides families access to the firm’s expertise in infrastructure investment—specifically, its capacity to do 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,” says Janson.
Data centre investment is not an undiscovered concept, says Joseph Abramson, co-chief investment officer at Northland Wealth Management, a multi-family office in Oakville, Ont. Some data centre REITs, for example, have been around for more than 20 years. But in the current climate, his firm also prefers private, rather than public, exposure to the sector.
“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,”
says Abramson, who is based in Montreal.
Northland has invested in data centres in the U.S. and Europe via private equity investments, preferring those with a big land bank, access to electricity and servers.
“At the moment, we think that there is the potential for good returns in data centres if you own the land and if you have the servers—those are both constraints,” he says. “And then, in addition to that, access to electricity and cooling.”
Managing risk in data centre investment
A long-life asset such as a data centre, explains Greg Nott, senior vice-president and chief investment officer at Northwood Family Office in Toronto, is a reasonable fit to consider from a family office perspective. Northwood’s goals-based investment approach, he says, results in most clients having a long-term or multi-generational time horizon.
While data centres represent a growing area with interesting return prospects, he says, his family office is not investing directly in any projects, but it is exposed to the space through some of its private market fund mandates.
“We do treat it as just one exposure within an infrastructure or real estate allocation,” Nott says. “We’re not looking to have a dedicated allocation specific to data centres and be over exposed to that area because, yes, there certainly are risks as well.”
One of those risks, he says, includes strain on the power grid as data centre growth continues and the investment required to increase supply grows—with some hyper-scalers even seeking to build their own power supplies in some cases.
Indeed, as the International Energy Agency explains, hyperscale data centres have power demands of 100 MW or more—their rapid growth could outpace the ability to strengthen grids or generation capacity and put strain on local power networks.
Some have also voiced concerns about overbuilding and overinvestment in the sector, says Nott.
In January, China-based AI startup DeepSeek caused a market disruption when it presented a lower-cost, less energy-intensive model, raising questions that the scale of long-term investment in data centres may not need to be as large as once thought.
In Abramson’s view, meanwhile, potential constraints for data centre construction could arise if risk aversion increases, if there are issues with local zoning, or problems getting or storing electricity in specific locations.
But he doesn’t see the DeepSeek development, or any AI disruptor, as undermining data centre demand.
“It increases the democratization of AI and advances the timeline to when we’ll reach general intelligence—in other words, a true thinking machine, which we don’t have right now,” he says. “Like all tech revolutions in the past, more efficient AI like DeepSeek will lower prices, increasing demand.”
Ultimately, the long-term timeline with respect to AI and cloud storage demand are what make data centre investments compelling for some family offices — especially in the context of the alternatives space.
“That is where I think family offices have an edge,” says Janson. “It’s very patient capital, and patient capital can be very powerful, certainly when allocated to the right sectors, like this.”