Global M&A investment in data centres will hit $20bn in 2017

By:
Natalie Bannerman
Published on:

Forcasters predict that investment in global centres through mergers and acquisitions will top $20 billion by the end of 2017

Colocation power has hit a Q3 YTD (year to date) record of 86MW across London, Frankfurt, Amsterdam and Paris, causing a surge in investment in the sector.

According to data from CRBE, the global real estate advisor, M&A investment in datacentre will reach a staggering $20 billion by the end of 2017.

2017 has been a remarkable year for colocation in Europe”, said Mitul Patel, head of EMEA data centre research at CBRE.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.”

Additionally much of this new supply is down to investors attempting to capitalise on the demand in a sector where speed-to market is key. Across the four markets 20% of the supply has been brought on over a single year. And projected at 195MW for the full-year, equates to a capital spend of over £1.2 billion ($1.6 billion).

“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,” added Patel.

London in particular has been the hub for data centre activity in Europe throughout 2017, and its 1MW of take-up in the Q1-Q3 period represents 48% of the European total. Through the course of the year it was also the location for two key investments in the sector. 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.

Looking ahead CRBE predicts that market activity will continue into Q4 via three main ways; the first being strong demand and significant moves into the market from the Chinese cloud and telecoms companies, secondly forecasts that 80MW of new supply will come online in Q4, including new companies such as datacenter.com, KAO and maincubes, and lastly continued investment activity, with at least one major European investment closed out by the end of the year.

“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,” concluded Patel.