Data Centres Attract $22 Billion Investments Globally till May in 2024

 Led by the US and Europe, which have emerged as dominant jurisdictions, as much as $22 billion have been invested in the Data centres globally in the first five months of 2024, data analysis from the UK-based global law firm Linklaters said.

This follows a noteworthy year of activity, 2023 witnessed a significant $36 billion in such kind of investments, marking it as the second-largest investment year in the past decade.

This year’s figures set a positive tone for the year ahead and underscore the increasingly critical role that data centres play in supporting the expanding digital economy, Linklaters said.

Data centre transaction values have seen North America maintaining its lead, accounting for an impressive 62% of the global total in 2023 and 69% of investments up to April 2024, equating to $15 billion invested, with the US taking the largest share of the total.

Highlighting Europe’s growing importance in data centre market, the region has shown a notable surge in activity, increasing its share from 6% in 2022 to 20% in 2023. Over $7 billion has been invested in data centres across Europe taking a 29% share till date this year.

While North America continues to hold a significant portion of activity, Europe stands out as the only region to build a year-over-year increase in transaction volume in 2023.

Rich Jones, TMT Partner at Linklaters said that there is currently a real clamour for involvement in the data centre market, which is brought about by the sheer demand for data centre capacity (and the widely-accepted projections for the demand’s continued growth).

Increasingly complex structures are now being used on data centre transactions, to open up the market as widely as possible and attract even investors who have not historically invested in digital infrastructure.

He said that with developers facing growing challenges in relation to resources (such as power supply and cooling), environmental requirements, financing, supply chains and local authority permits, data centre owners are using corporate structuring to put finished or “stabilised” data centre assets into separate corporate entities.

Doing this helps to isolate investors from some of the risks of data centre development, and thereby encourages investment from funds and financial sponsors who would not typically have the appetite for the digital infrastructure market at all, he explained.

“This ability for new types of investors to be involved in the data centre market in turn fuels further investment demand (and exacerbates the development challenges) – it’s certainly an active time for the sector,” he added.

Josh Feit, Counsel at the US-based Linklaters, said that the substantial investment in data centres across North America underscores the critical role that data management and storage play in the modern economy and the high demand for cloud services and robust infrastructure to support data-intensive applications.

Europe’s New Hot Spots

France is starting to emerge as a new jurisdiction to watch with nearly $4 billion channelled into the sector through six M&A transactions in 2023. However, a significant level of investment came from Brookfield’s acquisition of the Data4 data centre from AXA Investment Managers Real Assets for $3.8 billion, a transaction led by Linklaters.

Italy is emerging as a new hotspot for data centre investment, with over $1billion in greenfield investment across three deals. This includes the construction of two 40 MW hyperscale data centres in Bellini and near Milan.

In the last 5 years, 30% of data centre investment in Europe has been in the UK, a total of around $7 billion over this period has been invested.

Daniel Law, Financial Sponsor Partner at Linklaters, said that appetite for data centres within Europe is growing exponentially, driven by evolving technology such as AI. This surge in demand is fuelling a wave of investment geared towards developing robust digital infrastructure capable of supporting the continent’s growing data needs.

“Private equity and other financial sponsors continue to be a driving force behind much of the activity in the last eighteen months. Some sponsors are having to get more creative when it comes to liquidity, as many of these data centre platforms are now incredibly large and for investors it could be hard to sell off their stakes,” he said.

Linklaters is at the cutting-edge of the digital infrastructure sector and the remit of the team has widened as the market has grown to incorporate a growing number of digital infrastructure assets, including data centres, fibre, towers and satellites.

These transactions often involve multiple complexities of bespoke corporate and financing structures, an increasingly regulated investment sector, and complex development and offtake contracts driving value, playing into the combined strengths of our market leading corporate, finance, telecoms and regulatory teams.