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Thoughts:
DICE Local – data center investment conference

Written by: Neil Winch / Development Director at Yondr

Thoughts:
DICE Local – data center investment conference

Written by: Neil Winch / Development Director at Yondr

DICE Local - data center investment conference


Really exciting to be welcomed to Bisnow’s first investment conference in the UK, focused on Data Center Investment. Of course the speakers are talking about a busy M&A sector, new entrants and key issues in Data Center Financing.

Our first speaker, Kemal Hawa, Shareholder at Greenberg Traurig proposed that the sector doesn’t sit neatly in traditional real estate investment classes.

Infrastructure investors are in part expanding their scope to support the sector, but not in full. This is proposed as being owed to infrastructure such as roads, tunnels and bridges with “tolls” going one way…in data centers, we typically pay penalties for poor performance. While it is true to say that we have penalties, it is also true that so does infrastructure. Perhaps infrastructure looks to scale and government indemnity to provide security over the assets.

Similar issues exists for other investors, such as traditional residential of commercial offices, where rent typically moves in a single direction. Again, we do see risk in this subsection of the sector too…so where is the challenge?

Typically in data centers, value takes the form of leases, rather than perpetual physical assets and income. Owed to DCs being centred around service agreements, investors can find themselves questioning whether the service agreements are leases. What does this mean, well in common law, investors may find themselves less protected by common law real estate protections. I’d be interested to hear views on this, as it intuitively feels like it should be simpler to me.

We as an industry also need to address high profile liability and security issues. DC operators can see themselves as Space and Power providers, our customers do see privacy and data security issues as a risk, and in some cases impose penalties on the owner operators. Perhaps rightly so, providing physical security infrastructure and or physical security of sites is our thing so to speak.. This was an interesting insight, as it provided some context around a customer opportunity.

So.. on to questions asked.. What does the market look like in five years time?

Hyperscalers vary in their board room intent, moving from hyperscale (100mw +) facilities to “edge” facilities.. the view being we will need 1000’s of new data centers, varying between hyperscale and edge.. Seems to be a common theme..

Interestingly, the question was asked, “why do we exist”? The simple answer, as a result of IT demand, and IT demand is moderately unknown for anything more than three years. With the introduction of AI, users of data centers who traditionally thought they may need 10 DC spaces across the globe in five years, are now saying they may need 100…but don’t always know where they need those facilities. This supports cloud solutions for our hyperscale customers.

As always at a conference, interesting and varied insights, the common theme, challenges in a growing sector. Good people, and good vibes! Thanks to BisNow and all in attendance.

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