GLOBAL M&A INVESTMENT IN DATA CENTRES SET TO TOP $20BN IN 2017
- Continued strong demand driving investor appetite in Europe
- On course for 20% new total supply in 2017
The data centre sector is seeing record investment levels as investors seek exposure to the record market growth in Europe. This investment is driven by take-up of colocation power hitting a Q3 YTD record of 86MW across the four major markets of London, Frankfurt, Amsterdam and Paris, according to global real estate advisor, CBRE.
There is also a substantial amount of new supply across the major markets as developers look to capture demand in a sector where speed-to-market is still key. The four markets are on course to see 20% of all market supply brought online in a single year. This 20% new supply, projected at 195MW for the full-year, equates to a capital spend of over £1.2 billion.
London has been centre-stage for European activity in 2017, its 41MW of take-up in the Q1-Q3 period represents 48% of the European total and dampened any concerns over the short-term impact of Brexit on the market. London was also home to two key investment transactions in Q3 as Singapore’s ST Telemedia acquired full control of VIRTUS and Iron Mountain acquired two data centres from Credit Suisse, one of which is in London.
CBRE projects that the heightened market activity seen so far in 2017 will continue into Q4 in three forms:
- A continuation of strong demand, including significant moves into the market from the Chinese cloud and telecoms companies.
- Further new supply; CBRE is projecting that 80MW new supply will come online in Q4, including several brand-new companies such as datacenter.com, KAO and maincubes
- Ongoing investment activity, with at least one major European investment closed out by the year-end.
2017 has been a remarkable year for colocation in Europe and, with 2018 set to follow-suit, any thoughts that 2016 might have been a one-off have been allayed. We have entered a ‘new-norm’ for the key hubs in Europe, where market activity is double what we have been accustomed to in the pre-2016 years.
Given this ongoing market activity, it is no surprise to see so many investors wanting a piece of the action in Europe. As demand for data centre capacity continues to entice investors, the pool of available companies and assets diminishes. Consequently, those looking to deploy capital in Europe will need to act decisively, leading to more M&A investment in the coming year, beginning in Q4.
Furthermore, the low cost of capital available to large data centre developers, and a shift from private equity to more longer-term institutional and infrastructure investors, will mean that both investment volumes and prices paid will remain at historically high levels.