Data centre proliferation demands digital ecosystem

Interest in digital infrastructure and data centres is now “huge” and has been growing at a rapid rate over the last five or six years, according to Tania Tsoneva, cenior director, global infrastructure research, CBRE Investment Management.

However, these assets are still a relatively new entrant to the infrastructure asset class. “These are very diverse assets, very distinct business models and we think that investors will need to have a different skill set,” Tsoneva told Real Asset Insight’s Richard Betts.

“We think that there are bright prospects for digital infrastructure, all underpinned by the digitalisation that’s growing exponentially.”

“Generative AI is another inflection point which is going to add incremental demand for data centre capacity, but also for power demand,” Tsoneva said.

But is it infrastructure or is it real estate?

“The good news is that it has characteristics of both. It is a ‘crossover’ sector. We believe that a lot of the value is on the infrastructure side – being able to provide power supply, cooling, backup facilities – the kind of technical, critical infrastructure that is hosted in a data centre.

“But, at the end of the day, it’s also all about concluding a lease, having stable lease income. If you have expertise on infrastructure and real estate I think you’re in a better position,” she said.

Data centres are a global opportunity, Tsoneva added because digitalisation is a world-wide theme. “It just so happens that a lot of data centres – about 30% of the current capacity – is in the United States -and we believe that the US is going to continue to attract a lot of investment especially in terms of generative AI in the larger scale facilities.”

“That doesn’t mean that there’s not going to be opportunities in Europe or Asia Pacific,” she added. “They’re at a different stage in terms of their development.”

But that is why they need to build a whole digital infrastructure ecosystem. “So I think it is an opportunity that’s just moving across the world.”