Data Centre vs Logistics Real Estate: Where Should Capital Go?

Data centres offer scarcity-driven return and secular AI-linked demand, but come with high capex, operational complexity and concentrated tenant risk. Logistics offers deeper liquidity, standardised leases and lower operational intensity at 4.75%–6.75% prime yields. Most institutional portfolios in 2026 blend both, with logistics as the core income anchor and data centres as an alternatives overweight.

Why compare data centres and logistics?

Data centres and logistics are the two sectors absorbing most of the capital that has rotated out of European office and retail since 2020. Both are demand-led by structural forces (AI compute, e-commerce, supply chain redesign), and both benefit from scarcity of well-located sites. The differences are in operational intensity, tenant concentration and exit liquidity.

How do yields and returns compare?

• Prime European logistics yields: 4.75% – 6.75% depending on market
• European hyperscale data centre yields: 5.50% – 7.00% (stabilised)
• Powered shell data centre: 6.50% – 8.00% for development-stage risk
• Logistics unlevered IRR (5-year core): 9% – 14%
• Data centre unlevered IRR (5-year core): 11% – 16%, with more capex volatility

According to Savills European Data Centres research, vacancy in the FLAP-D markets (Frankfurt, London, Amsterdam, Paris, Dublin) remains structurally below 5% as AI training and inference workloads push power requirements far ahead of grid capacity in most of Western Europe.

What are the key risk differences?

• Tenant concentration: data centres concentrate in a handful of hyperscalers; logistics is diversified across 3PLs, retailers and manufacturers
• Capex intensity: data centres consume 15%–25% of NOI in mechanical/electrical refresh cycles; logistics is closer to 3%–8%
• Power dependency: data centre value collapses without grid capacity; logistics is largely power-agnostic
• Liquidity: European logistics has a deeper institutional buyer pool at every ticket size
• Operational complexity: data centres require specialist operating partners; logistics does not

How should a mixed real assets portfolio blend them?

For a typical institutional allocator, logistics belongs in the core income sleeve at 15%–25% of a real estate portfolio, while data centres sit in the alternatives sleeve at 3%–8%. Data centres reward specialist operators; logistics rewards disciplined market selection and off-market sourcing.

For a fuller view on why industrial has structurally outperformed its property-sector peers, see our note on industrial outperformance versus office and retail.

Frequently asked questions

Which is a better investment: data centres or logistics?

Neither is universally 'better'. Logistics offers deeper liquidity and lower operational risk at 4.75%–6.75% prime yields. Data centres offer higher return potential (11%–16% IRR) but come with capex intensity, tenant concentration and power dependency. Most institutional portfolios blend both.

What are prime data centre yields in Europe?

Stabilised hyperscale data centres in the FLAP-D markets currently trade at 5.50%–7.00% net initial yields. Powered shell and development-stage product trades wider at 6.50%–8.00% to reflect construction and lease-up risk.

Are data centres safer than logistics?

Not straightforwardly. Data centres have longer leases and creditworthy tenants but concentrated exposure to a small number of hyperscalers and heavy capex cycles. Logistics has shorter leases but broader tenant diversification and lower operational complexity.

Can the same investor buy both data centres and logistics?

Yes, and most large real assets platforms do. The typical split is 15%–25% logistics in the core sleeve and 3%–8% data centres in alternatives. Data centres usually require a specialist joint-venture operating partner; logistics can be executed through specialist advisors and local asset managers.