PwC: assessing the impact of ongoing digital transformation

Digital transformation is ongoing and fast-moving: it is having an impact on competitiveness today and its importance will continue to grow, delegates heard at Real Asset Media’s Unlocking Opportunities: Digital Infrastructure & Data Centres briefing, which took place yesterday at PwC’s offices in London.

Thomas Veith, Partner, Global Real Estate Leader, PwC

“Digital transformation is a pervasive force impacting all aspects of life, driving innovation, economic growth and social progress,” said Thomas Veith, partner, global real estate leader, PwC. “Digital infrastructure is a puzzle with many pieces and there are many crossovers between the different components.”

According to a PwC study, infrastructure is the fastest-growing asset class with global assets under management set to grow substantially over the next five years. But while infrastructure expansion continues, many regions still lack sufficient digital infrastructure, be it fibre, data centres, towers or satellites.

“Artificial intelligence has been a key accelerator of digital infrastructure, presenting both opportunities and risks,”  said Veith. “All the large funds are ramping up their DI investments.”

Within digital infrastructure (DI), data centres are seeing the strongest growth in demand. They represent the merging boundaries between real estate, technology and infrastructure and influence all three sectors.

Source: PwC

In the latest Emerging Trends in Real Estate report by PwC and ULI, data centres emerged the number one sector to watch, overtaking logistics and residential as having the best prospects.

“It is a sector that used to be niche but has now become mainstream, and we expect a doubling of demand in highly developed countries as well. Investment managers have ambitious investment plans for the sector and plan to set up own sector teams.”

From an investment perspective, data centres are currently compared with logistics real estate before the e-commerce boom affected the asset class.

“The outlook for the sector is clearly positive, with all the opportunities but also the challenges it brings,” said Veith. “It is crucial to countries’ economic growth and competitivess, and it is attracting more investment, but we must be aware of the problems in order to ensure a sustainable digital future.”

Challenges that need to be addressed include such as cybersecurity, data privacy, and the issue of the equitable distribution of digital benefits. Sustainability and the availability of power are other crucial issues. The surge in AI computing needs is driving higher power consumption and power density in data centres.

Rules are also likely to change, Veith said: “We expect there will be new regulations to address the critical role of DI and AI in overall infrastructure.”