Digital infrastructure backers see boom in end user demand

Although growing investor interest in data and telecoms infrastructure is underpinned by exponential growth in consumer demand there are hurdles to cross, experts agreed at Real Asset Media´s Infrastructure Summit: Digital & Telecoms, which took place recently on the REALX.Global platform.

PwC director of digital infrastructure advisory Caspar Preysing,  commented: “We’re going to be seeing very strong growth in fibre investments over the next years.“

But one issue Preysing foresees in Germany is how landlords’ in-house data networks, particularly those of the large housing providers, secure the supply to their tenants and define the role they want to play.

Two particularly hot areas of investor interest are are telecoms towers and data centres. “Both of these are at a very early stage of evolution vis-a-vis more mature markets,” said Green Street managing director, advisory and consulting Jesse Freitag-Akselrod.

“Penetration of towers is high in Europe, it’s an ownership switch, and they will become a more institutionalised asset class over time as the telecoms divorce themselves from the towers to roll out 5G networks,” he said.

Data centres seeing exponential growth but long lead ins

“On the data centre side we’re right at the beginning of a huge exponential growth curve. Some of these internet actors say ‘give me 10 megawatt power in six months’. Well it takes three years to find a plot of land and build it out so I think we’ll see a lot of pressure on the demand side and investment returns will shift around a bit too,” added Freitag-Akselrod.

Demand emanates from the public sector too. Glasgow City Council’s head of digital economy Anne McLister, contends that: “Digital connectivity is the fourth utility, it will be implicit in everything we do and in all our services. It won’t be the afterthought, it will be the way we do it as opposed to ‘gosh it’s another demonstrator project pilot that we have to start with’.”

But the increasing commitment to digital infrastructure from both the private and public sectors is considered a force for good and for wider benefit.

“Smart city solutions, further using digitisation for interconnectivity in the urban areas, can solve a lot of the ESG issues we are currently facing and will face more and more,” said Thomas Veith, leader, real assets, Germany, PwC.

“Real estate owners are already discussing this. If they want to share energy, for example, they need connectivity between buildings that doesn’t yet exist. So that’s the big topic. It plays to the E the S and the G agenda,” he concluded.