Knight Frank is advising property owners on the sale of 10 London sites that could be turned into data centres.
The property services firm is advising a mixture of owners but predominantly PE (private equity) funds currently looking to benefit from premium alternative/data centre use.
The sites are either existing industrial or office developments varying in cost between £30 mln up to £130 mln, and which when aggregated could add up to a total of £1bn (€1.2 bn) of transactions when all 10 sites sell. Data centre operators and cloud ended users are potential buyers.
The news comes as data centres become an increasingly investible institutional asset class.
Earlier this week, Ascendas Reit, a Singaporean group sponsored by CapitaLand, announced its first foray in the European data centre market with the acquisition of 11 assets from US specialist, Digital Realty, for €569 mln. Four data centres are located in the UK, three in France, and one in Switzerland.
Last month, PropertyEU revealed how Principal Real Estate Investors is planning to launch a European data centre fund in an early example of real estate fund managers acting on the opportunity.
Meanwhile, property services firms are beefing up in this area. JLL hired Tom Glover as head of EMEA data centre transactions from CBRE, as well as Mike Harrington as head of data centre facilities management. Earlier this month, CBRE announced it had made five new hires from JLL. In February, Knight Frank hired Ben Stirk as co-head of global data centres alongside Stephen Beard.
Investment volume
In an EMEA data centre report out on Wednesday, Knight Frank said there had been a record $34.9 bn (€29.3 bn) invested into the data centre and digital infrastructure sector globally in 2020, eclipsing the previous 2017 record of $24.8 bn. 2021 looks set to be a strong year for investment into the data centres market, with $13.5 bn of deals currently being tracked and expected to complete in the next six months.
The data centre market has seen a significant increase in demand over the past year, with the EMEA markets in 2020 seeing take-up rise 11% higher year-on-year to a substantial 701MW and a 19% increase in new supply, totalling more than 1,589MW.
The new report published alongside DC Byte challenges previous industry reporting on the scale of the EMEA regional market and looks at all data centres as an asset class, including both enterprise and colocation developments, across seventeen key European markets.
The report highlights the accelerating growth of the challenger markets, which are emerging as data centre developments expand outside of traditional hubs to create smaller clusters. It cites that challenger markets experienced a take-up increase of almost 100% and have been responsible for powering the performance of the sector, whilst the core FLAP-D markets remained consistent in their growth levels.
It also highlights power to sites as being a key challenge.
In Slough and West London for example, nearly all grid substation capacity has been contracted for the next few years. With scarcity of resource creating concern with regard to business growth models, developers and operators are increasingly ‘banking’ available power even when phased build out means that the resource will not be required for years ahead.
European markets
The core FLAP-D markets of Amsterdam, Frankfurt, London, Paris and Dublin collectively equalled performances set in 2019 with 504MW, whilst take-up in the same time period outside of the core markets increased by 97% at 197MW. Amsterdam led take-up growth in the core markets in 2020, with levels reaching 166MW, followed by London with 148MW, Frankfurt with 109MW, Paris with 68MW and Dublin with 11MW.
Other fast-growing locations include tier 2 location Madrid, which performed at similar levels to Paris. They succeeded with 66MW of take-up compared to Paris’s 68MW. New data centres deployments within the Spanish capital included those by DATA4, NTT and Nabiax.
Knight Frank’s Stirk, said, ‘It is particularly exciting to see new smaller data centre hubs emerging in response to increased user demand for new technologies and services whilst shrewd investors seek opportunities to acquire and develop in both traditional and these challenger markets.
‘We expect to see increased interest from both investors and real estate companies who are looking to capitalise on the strength of the sector and secure the long-term income it provides.’
Ed Galvin, founder and CEO of DC Byte, added: ‘Demand for data centre space and public cloud services has soared over the past year and this report demonstrates the underlying strength of the data centre market continues to gain momentum; growing exponentially, both in core and emerging markets.’
Knight Frank expects that the European data centres market will mature and expand over the next year and that 2021 will see at least a 10% increase in Cloud and wholesale take-up levels owing to further adoption and migration to public cloud in the short term.
