Data centres: institutional capital chasing hypergrowth markets across the Continent

More than $100 billion has flowed into the data center ecosystem in the past decade, according to Cushman, as pension funds, private equity firms, infrastructure funds, sovereign wealth and many other organisations all recognised the growth potential of the sector. This capital has allowed the industry to expand at a lower cost, as many funds have taken ownership positions in new companies rather than acquiring data centers asset-by-asset.

Investment of this type has been highly beneficial for the data center industry, and these organisations are looking to deploy a similar amount of capital if attractive opportunities arise. This significant capital inflow has been matched by an equally major technical shift throughout the industry, as enterprises have chosen to move workloads off premises – first to colocation facilities and more recently to a mixture of colocation and public and private cloud computing.

This shift has caused the largest cloud platform providers to become the most important players in many markets, signing leases so large they have altered data center sizing by a factor of 10, says Cushman. Cushman’s study evaluated 1,162 data centers across 38 global markets, with each data center scored across 12 weighted criteria. In consideration of each market, the highest weight was given to cloud availability, fiber connectivity and market size; mid-weight considerations were development pipeline, government incentives, market vacancy, political stability and sustainability; and low-weight considerations included environmental risk, land prices, power costs and taxes. 

Although the study’s top three markets had considerably higher scores than fourth place, the next 12 markets were separated by a final score of less than 10 percent. This close placement represents a new shift toward key secondary areas fast becoming primary markets around the globe.

Large sites have sold recently in emerging U.S. markets such as Portland, Phoenix, and Atlanta, with these areas potentially offering significant savings over locating in California or Northern Virginia. Additional markets in Asia-Pacific – especially Sydney, Tokyo, Hong Kong, Beijing and Shanghai – also are expecting considerable growth in the next two to three years, with demand for greater connectivity and need for modernization of older assets required. The top 15 global markets will thus remain extremely competitive for the foreseeable future.

Kevin Imboden, Director of Research for Cushman & Wakefield’s Data Center Advisory Group, explains:

“The top markets provide the greatest number of options to the greatest number of perspectives. While one size sometimes does fit all, for certain specialisations it’s important to review and understand the factors most important to the specific requirement and aim accordingly. Combined with those markets that have been overlooked and underutilised, there is great potential for niche development and secondary markets across the globe.”

james.wallace@realassetmedia.com