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$Billion growth funds and their impact on the data center market
Over the past two years billions of dollars have been closed in funds designed to invest in global data centre and digital infrastructure markets. Private equity, large investment firms, pension and sovereign wealth funds and more recently Alt institutional investors have spent tens of billions of dollars through acquisitions of data center platforms and poised to invest more, substantially shifting ownership in the sector. The surge in remote work and virtual business models, cloud services, e-commerce, gaming, video streaming and other digital services has in turn spurred demand for digital transformation initiatives. Investors recognize that data centers as an asset class has changed over the past two years alone in terms of its importance and maturity. Investment structures have also expanded from triple net lease real estate model of data centres through to investment in operating firms taking development risk on new fibre construction.
- What is the scale and size of potential dollar investment in digital infrastructure by class over the next twelve months?
- How have risk/reward profiles of investments in this sector changed over the past two years?
- What is the perspective of digital transformation in the medium term and are how much are some of these investments speculative?
- How are margins performing?
- What are the risks associated with exit from these markets?
Investing in Digitizing and Powering Africa
Africa’s growing importance coincides with a global influx of capital to build digital infrastructure. Yet the continent’s infrastructure remains massively under-invested with reportedly less than 1 per cent of global data centre supply, outdated power systems, and scant terrestrial fibre. South Africa, Nigeria, Kenya and Egypt stand out as more advanced in terms of infrastructure development but the new subsea cable systems and cable landing stations around the continent are driving new markets and opportunities. The Africa Data Centre Report suggests that future demand will come from small and medium-sized enterprises, and government agencies, who are likely to underpin the market, with more than 70% of African organisations estimated to shift to the cloud by 2025.
- What is the scale of investment needed to deploy infrastructure and power across the continent?
- How will digital infrastructure in Africa be powered now and in the future?
- With 54 countries across the continent, which markets are likely to present more intensively the next stage of digital infrastructure development?
- What are the major financial risks Africa confronts in its digital development?
- Is Africa likely to become a net exporter of Hydrogen?
Growth and Change in Central European Markets
A combination of accelerated investment in technology and network connectivity which has taken place across all markets over the past two years, with high demand generated by mobile usage, e-commerce, streaming and gaming market, as well as the extension of cloud regions by hyperscales has generated of strong demand drivers across the region. A shift in datacenter use from basic servers to enabling hybrid digital infrastructures has been evident in central European markets. Poland is now one of the largest markets in the region and capacity is forecast to double in the next six years, a trend beginning to be reflected in other markets in the region.
- What are the growth prospects for data centers in the region over the next 12 months?
- Which countries benefit most from key market drivers with large pools of development land and fibre connectivity?
- What renewable energy resources are being deployed and which methods are being selected to meet ESG goals?
Asia forecast for growth – what are the risks?
Digital infrastructure markets in Asia are booming and cloud traffic increasing. In 2021 Asia attracted around 30% of all global investment in data centres. Hyperscale market entry by US players, investors from primarily Singapore and Canada, the quest for MW power, land and connectivity converge with high end user demand to create a vibrant landscape for development. Added to this the launch of subsea cable system APRICOT in 2023 will connect Japan, Taiwan, Guam, the Philippines, Indonesia and Singapore sponsored by Meta and Google with the potential to contribute nearly USD600 bn in additional GDP by 2025. Yet global tensions are in play across the region which may impact the next 12 months.
- Where is the risk in Asia, what could go wrong?
- With so much growth forecast, is there a danger of increased regulatory barriers to development?
- Do you envisage that Real Estate Investment Trusts will proliferate in Asia in the short to medium term?
- Where will we see substantial growth – emerging markets or China?
- Is growth dependent on continued investment by hyperscales?
- How important is Edge deployment for Asia and Pacific?
M&A, multiples and valuations – how high can they go?
As an institutional investment class, pricing for core data centres is becoming extremely competitive and many more investors are entering the space. Acquisitions and multiples – achieving between 30 to 38x - have accelerated over the past two years. With funds closing billions of dollars, cash deals have been at the forefront of M&A activity. Owners of neutral, multi-tenanted data centre platforms, sometimes across several countries are well placed to leverage uptake by enterprises in the post pandemic period. And targeting enterprise and government customers, they may become targets themselves for, or drivers of, consolidation.
- Do the current multiples add up? Are we likely to see bigger valuations?
- Why primarily attracts investors to data centres?
- Many of the acquisitions that have taken place are in the US and Europe. Which geographies do you see in the next phase of M&A?
- Do you foresee multiples and values increasing further?
- How do you evaluate risk in terms of the asset class itself, and its potential vulnerability to cyber attacks?
- What are the key drivers of value in the sector?
Renewable Energy and Decarbonisation – why ESG is critical for Data Centre Investment
Customers are driving the trend in scrutinizing supply chains to ensure they are consistent with their own sustainability goals to meet ESG plans. As contributors to indirect carbon emissions given the large power demands for IT load capacity has shifted consideration for investors from a peripheral concern to mainstream. Consumption of energy by data centres have made them prone in some circumstances to public review and political action. Post-pandemic, during which operators needed to scale very quickly, there is a focus on cost control. The circular economy has also moved up in importance to sustainability strategies. To achieve carbon reductions and zero use in the decades ahead, renewable energy options for data centres – wind, solar, hydroelectric – are being actively considered to include geothermal energy, green hydrogen and even nuclear. It has also led to increased focus on water scarcity and reducing the impact of data centres on local water supplies. In Europe the sector is targeting 100% renewable energy by 2030.
- What is the critical link between investment and green energy?
- Many investors are still in the process of determining their frameworks around ESG analysis - how do they assess risk without precise ESG benchmarks in place?
- Some government initiatives offer building power platforms providing on-site power adjacent to large scale campus developments – is this a trend that is likely to continue?
- How do investors rank new power solutions?
Towards a metaverse infrastructure
Over the next 7-10 Years the scale and deployment of infrastructure for blockchains will contribute to the usability of a coming metaverse which will transform experiences across the planet. It will present a new basis for global competition. Platforms such as Solana and Filepoint are gaining traction. Current perceptions of crypto and bitcoin will change as decentralization of networks is sustained.
Guest introduction and opening: Mark Thiele, CEO, Edgevana
- What is the current status and outlook for metaverse implementation around the globe?
- Where are the main investment opportunities?
- How will the convergence of metaverse and ESG ignite brand new investment opportunities across the sector?
- What methodologies exist to acquire real estate in the metaverse?
India and a new era of Hypergrowth
India’s current data centre power stands at approximately 500MW and industry expectations suggest this will more than double by the end of 2023. Many of the world’s leading hyperscale firms have or are in the process of establishing data centre facilities usually in partnership with Indian owned companies combined with the assurance of renewable energy supply. Competition for their business is now increasing both as customers and among India’s states. Coastal cities Mumbai and Chennai are leading the race to build due to the dense subsea cable connectivity. With a population of 1.4 bn, and average data consumption forecast to 50GB per month before 2027, the scale of the digital data opportunity is vast. As 5G is deployed combined with ever-rising digital usage, cloud consumption and real-time applications could place India at the forefront of world success in delivering Edge services.
- How will the convergence of regulations, government initiatives and investments impact future growth of data centres in India?
- Participants in India's market require scale - what do you see as the scale of the investment opportunity to support growth and meet market demand?
- Will hyperscales bring competition or co-opitition to colocation players?
- How do you foresee the development of green energy resources and which do you think will be the best long term bet?
- A number of edge deployment plans have been announced. Is this a key investment proposition for you and your company?
Above, below and beyond – new data center space, location and business models Subsea, Cable Landing Stations, Satellite and Space data centers - Pioneering Business Models for Investment in infrastructure
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Women in Finance and Tech Roundtable
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Site Selection in an era of challenging energy transition
As some of the world’s leading data center markets – Singapore, Amsterdam, Dublin and others – suspend or temporarily pause international data center development, combined with growing concerns amid the international crisis for energy supply security not only in Europe but globally, what criteria will be used to select the best sites for land acquisition and, or, new build? How will energy policy makers impact data center markets in the foreseeable future?
- What are the criteria for Site selecting Tier II and III hubs with market access, clean energy, connectivity, latency and security
- Where are the new hubs and what market access will they be able to offer and how quickly?
- In the changing environment, how will Tier II and III hubs now compete and fine strong USPs?
- Where are energy platforms being established, and how price competitive will they become?
- Will proposals for Hydrogen and Nuclear energy solutions be sustained?
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The ROI of a diverse and inclusive management board
Chair: Nicola Hayes, Non-Executive Director, Platform Markets Group
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Market Forecast – Winners and Losers in the Data Center investment surge
Although significant new market opportunities for investment in capacity growth will continue to emerge, a change in the competitive dynamics will also lead to new winners and losers.