The recent boom in real estate tech funds is the most visible application of technology and AI to real estate assets and their operation. But a potentially more impactful technology revolution, space tech, may yield even more profound implications on all things terrestrial. Those impacts are here today. They are not light years away.
The explosion of space infrastructure and related companies has been in the making for a decade or more. For example, while Space X is certainly the most recognizable name in the innovative ‘re-launch’ arena, there are, in fact, more than 170 launch companies in the world.
Let us put this real-time boom into perspective. According to Seraphim Research, the cost to launch a satellite has fallen by nearly 1,00 times since the original Space Shuttle was launched in 1981 from $85,000 per kilogram to under $1,000 per kilogram. The cost is anticipated to fall even further in the foreseeable future to below $10 kilograms by 2050.
At the same time, both the weight and cost of even more advanced satellites is plummeting. Satellites that used to weigh up to several tonnes, were as large as a school bus and cost over $1 billion to make today weigh 5 to 100 kilograms, are as big as a large Rubik’s Cube or small as a shoe box and cost $100,000 to $1 million to make, as per Seraphim data.
As a result of these dramatic advances in reusable launch capability and satellite technology and manufacturing, more satellites will be launched in the next five years than in the entire history of the Space Age.
Here is where this phenomenon meets the world of real estate. The explosion of satellites in space will result in digital data generation at a magnitude never before seen. Today, satellites generate about one quarter of the data that Facebook generates.
And all of this satellite-generated data is mission-critical to virtually all future things on the planet. Truly secure communications, driverless cars, drones, automated logistics, AI, sustainability (monitoring), virtually everything on the drawing board for evolved technology on Earth will need secure data from space to achieve the aspirations.
As a result, in the next few years, it is predicted that satellites will generate more than 25x the volume of data generated by Facebook. By nearly all accounts, we continue to struggle to keep up with the demand for data centers today. So how and where will we store all of that new data?
While pace of technology advancement has been robust in the past decade; covid made it blistering. And some believe now that real estate is not the only place to facilitate this exponentially growing data requirement. There are already companies plotting the development of data centers in space.
These are facilities that will bring many benefits. Those include virtually free solar energy, collectable by massive solar arrays already in design and deployment; the elimination of heat as one of the greatest challenges to terrestrial installations; the bonus of perhaps one of the most important elements, a direct point to end-user communications. That will be delivered without having to navigate private networks or other potentially hackable terrestrial networks that rely on encryption for security again constant attacks and 24/7 supercomputers seeking to crack the encryption.
While there will obviously be continued robust demand near term for well-located, Earth-based data centers, a decade from now, a 3.7 percent cap rate on a 20- to 30- year presumed ‘infrastructure-like asset’ – regardless of tenant credit – might not look so bullet-proof.
Similarly, covid has taught us that assets like airports, ports and schools that appeared to be stable and could weather any storm, became susceptible to unforeseen macro-shocks. Similarly, the evolution of drone transport and automated logistics could all have profound impacts on what we have always seen as durable, stable long-term assets. The rapid and continued evolution of all technology, but especially space tech, is likely to accelerate further dynamic changes that will continue to challenge our perception of what a long-term stable real asset even is.