Community Pushback Against AI Data Centers May Boost Dividend REITs

National resistance to the expansion of artificial intelligence data centers is emerging as a potential catalyst for real estate investment trusts (REITs) already operating in the sector. While hyperscalers face growing criticism over land usage, energy consumption, and noise, analysts suggest this backlash may indirectly strengthen the market position of established data center landlords.

Protests have intensified across the United States as major technology firms seek to construct facilities for training and running AI models. An NBC News poll indicates that 69% of respondents oppose building these centers in their local areas. With more than 4,700 data centers currently operating nationwide, projections from PwC estimate annual spending will surge from approximately $800 billion in 2026 to $1.8 trillion by 2050.

The political climate adds further complexity, with the debate expected to intensify ahead of midterm elections. Several states have introduced legislation to restrict or ban new construction, and New York has already implemented a moratorium on data center development.

Despite the headwinds for new projects, Mizuho analyst Vikram Malhotra noted in a September 1 report that existing data center REITs could benefit from pricing power driven by relentless compute demand. “Amid political and community push-back, while new projects could see delay, it could be a positive for existing projects/DC REITs,” Malhotra stated.

Data center REITs currently represent 13% of the total U.S. REIT market, which totals $1.5 trillion in capitalization. According to the National Association of Real Estate Investment Trusts (Nareit), public REITs own roughly 275 data centers in the U.S., accounting for less than 10% of all owned or leased facilities.

The FTSE Nareit Equity REITs Index includes three major players: Digital Realty Trust (DLR), Equinix (EQIX), and Iron Mountain (IRM). All three reported second-quarter adjusted funds from operations (AFFO) beating analyst estimates and subsequently raised their full-year guidance.

Iron Mountain leads year-to-date performance with a 42% gain and a 2.96% dividend yield. Equinix, the largest of the trio with a $102 billion market value, has climbed nearly 37% and recently partnered with Nvidia. Digital Realty has gained over 23% year-to-date, offering a 2.59% yield.

Wells Fargo Investment Institute analyst Amanda Martinez described the dynamic as nuanced. She argued that limiting new supply could elevate the value of existing capacity, particularly for REITs with permitted sites and secured power. However, she cautioned that permitting restrictions and moratoriums could slow development timelines and increase costs.

Green Street analyst David Guarino expressed strong confidence in Equinix and Digital Realty, citing their ability to pivot between markets due to extensive land banks and established municipal relationships. He believes their track record provides a significant advantage over newer entrants lacking similar operational experience.

Guarino favored Equinix over Digital Realty, noting that as AI inference shifts toward lower-latency, real-time applications, proximity to population centers becomes increasingly valuable—a strategy central to Equinix’s business model.

Alex Pettee, president and director of research and ETFs at Hoya Capital Real Estate, also maintains a bullish outlook. While acknowledging that moratoriums can disrupt specific projects, he argued that tighter zoning and difficulty securing power ultimately enhance the value of existing infrastructure.

“You’re getting double-digit earnings growth, tangible real estate and infrastructure, recurring contractual revenue, and a roughly 2%-3% dividend yield,” Pettee said, highlighting the sector’s appeal relative to the broader AI trade.