Why Data Centre Investments Are Only Set to Rise

Monday, September 17, 2018

According to a report by real estate and investment services company CBRE, global investments in data centres reached $20 billion in 2017, tripling 2016’s total of $7.7bn and quadrupling 2015’s $5.7bn. Powered by significant investments by Amazon, Microsoft and Google, and facilitated by the startling growth of cloud computing, mobile payments and IoT, data centre investment is set to keep rising.

Current investment levels

During 2017, companies spent more than $18.2 billion on data centres, according to CBRE’s report. As digital transformation strategies become commonplace and companies embrace the cloud, the industry is experiencing phenomenal growth.

As James Dodsworth, co-author of law firm White & Case’s report on data centres, explains: “It is widely reported that 90 percent of the world’s data was created in the last two years, which gives you an idea of the growth in [data centres].” In Ireland, for example, data centre investment is set to reach €9bn by 2021. In Germany, the situation is similar. In 2017, investments in German data centres increased by 10%, passing the €1bn mark. According to a report by Digital Realty, by 2025, UK-based data centres will be worth $135bn by 2025.

The growing need for data centres

Technologies like video streaming, connected cars and IoT all require data centres that are capable of supporting billions of internet-connected devices. At the same time, companies adapting to the cloud-based future need data centres to store and manage their information.

“Data centres create this value by providing and managing the infrastructure, connectivity and services that underpin success across the full range of economic activity,” reads Digital Realty’s report.

“This includes not only I.T. and financial services, such as powering high-speed trading platforms and cloud storage services, but also other sectors, such as agriculture, where data allows more precise use of pesticides, better adaptation to weather trends and automation such as drones to survey crops,” it continues.

The Cisco Visual Networking Index illustrates just how much data we are going to consume by 2021:

As our need for data skyrockets, data centres must grow in parallel.

Data centres for investors: an emerging asset class

Understandably, then, data centres are fast becoming an attractive investment. As yields and returns in traditional real estate shrink, investors are increasingly turning their attention to alternative assets like data centres, co-living and co-working spaces.

Data centres blend the traditional with the novel: like conventional property, data centres offer long-term contracts and recurring revenues, but with the added bonus of rapid growth prospects. As James Dodsworth from White & Case posits, “Very few asset classes have the global reach, growth trajectory and investor appeal that data centers enjoy today.”

“As technical advancements continue to come from Silicon Valley and beyond, the demand for data centres, storage, and secure, encrypted transactions is rapidly growing," reasons Ross Archer, CEO of Viderium. "One of the biggest sectors in focus at the moment is tech and data facilities, and because of this, we envision we will continue to see investment into these areas growing exponentially.”