Investors’ interest in data centres is surging globally, says Santiago Olivares, a partner at Spanish private equity real estate firm Azora, which has just put to bed its first investment into the sector.
‘We have received so many calls and expressions of interest from investors and clients after announcing our plans to build up a data centre portfolio in Iberia,’ he tells PropertyEU in an interview.
Clearly, data centres are benefitting from a number of strong growth drivers such as society’s rising need to process and store data. They also represent a complex market with very high barriers to entry where investors can enjoy limited competition.
‘While demand continues to grow, with traffic expected to increase exponentially over the next few years (or an estimated 25% per annum), there is no easy way for institutions to get access to this sector. An investor cannot simply buy data capacity because the existing data centres are not adapted to the current needs of most tenants. Suitable data centres need to be built from scratch,’ comments Olivares, who is in charge of energy, infrastructure and sustainability investments at Azora.
Azora, which is investing on behalf of its clients, is focusing on a specific type of data centre known as Edge. These types of facilities are smaller than the more traditional hyperscale data centres which are typically located at a considerable distance from end users.
‘Edge data centers represent a new category of data centers that are characterized by offering technological solutions to companies that require low latency in data processing and transmission. These data centers are located near large urban centers, close to end consumers, in order to reduce data traffic with large hyperscale data centers. They are more equipped and more versatile and they target content providers,’ explains Olivares.
Azora has pledged to invest a total of €500 mln to build up six Edge data centres in Madrid, Barcelona and Lisbon over the next five years. The strategy, launched under the name of Quetta Data Centers platform, is targeting a portfolio with data capacity exceeding 60 MW and utilizing 100% renewable energy to create Iberia’s first eco-efficient network of data centers.
Quetta, which is fully owned by Azora and its clients, will be advised by Core Capital, a team of data centre specialists with over 20 years of experience in the sector. The launch of Quetta is part of Azora’s strategy of investing in sustainable infrastructure.
Olivares: ‘The digitalization of the economy offers very attractive investment opportunities in the data centers sector, especially those aimed at companies that offer streaming content, gaming, augmented reality, internet of things and other technologies such as artificial intelligence that will experience strong growth as the speed at which society and business consumes data accelerates.’
The platform has already been seeded with a project currently under construction in Madrid’s Tres Cantos area. The facility is located very closely to Madrid’s Content City which is a major development where Netflix has established its first European production hub in Madrid. Quetta is also in advanced stages of negotiations to complete the acquisition of the land and the contracting of the construction of the other five centers in Madrid, Barcelona and Lisbon.
Olivares: ‘We expect to complete construction of these six centres within the next five years and they will initially be funded by equity. The Tres Cantos project in Madrid is currently the most advanced. It already has a project manager as well as energy permits in place.’
