Exclusive. ‘2016 wasn’t a one off’ – Global data centre M&As hit all time high as record market growth in Europe brings 20% of ALL market supply online in a SINGLE year

London, Frankfurt, Amsterdam and Paris had a total supply of 1,073 MW at the end of Q3, with more than 80MW set to be added in Q4 as datacenter-dot-com, KAO and maincubes enter the market.

Global investment has in the first half of the year (H1) topped $18bn alone, more than 2014, 2015 and 2016’s full year total combined, with North America representing a large percentage of the value.

Capital expenditures have also not slowed down post-H1, and major investments from the likes of Mapletree purchasing the Carter Validus data centres in the US for $750m, STT acquiring the remaining 51% ownership of VIRTUS in the UK and Iron Mountain purchasing two data centres, one in London and one in Singapore, from Credit Suisse, are just a few examples of this.

Europe has in fact led a large sum of M&As in Q3 which will contribute for an even higher record at the end of 2017.

According to CBRE’s Europe Data Centres Q3, 2017, longer-term infrastructure funds are now entering the European market too. For example, InfraVia has purchased Etix Everywhere and NGD, Digital Bridge, the owner of mast sites, has bought Vantage and BC Partners / Medina Capital completed their deal for CenturyLink for $2.2bn.

“As demand for data centre capacity in Europe continues to grow and consequently drive consolidation, the pool of available target companies and assets becomes smaller,” researchers wrote.

“This will intensify the need for prospective investors to act quickly and decisively if they are to deploy capital in the sector. With this in mind, we expect more significant transactions in the coming months.”

CBRE’s report also points out that the investment wave is driven by take-up of colocation power hitting a Q3 year-to-date record of 86MW across the four major markets of London, Frankfurt, Amsterdam and Paris.

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

Researchers predict the four markets are on course to see 20% of all market supply brought online in a single year. This 20% new supply, projected at 195MW for the full-year, equates to a capital spend of over £1.2bn.

Between July and September, of the 195MW, a total of 41MW of supply were brought online across London, Frankfurt, Amsterdam and Paris, bringing total supply across these metros to 1,073 MW at the end of Q3.

At the end of Q3 2017, London maintained its place as the largest market by supply and available hosting space at 437MW (Q3 2016: 384MW) and 74MW respectively. However, the British capital is runner-up to Frankfurt on the take-up front, with the German metro amounting to 13.9MW and London to ‘only’ 7.8MW.

Nevertheless, as Brexit negotiations continue, CBRE highlighted that London has been centre-stage for European activity in 2017, and its 41MW of take-up in the Q1-Q3 period represents 48% of the European total, dampening any concerns over the short-term impact of Brexit on the market.

With that out of the way, Frankfurt was at the end of Q3 the second largest market at a supply of 240MW (Q3 2016: 199MW) and 42MW of availability.

However, it is very close followed by Amsterdam with a supply of also 240MW (Q3 2016: 166MW) but one megawatt less in terns of availability. The Dutch city is the third in terms of take-up at 4.7MW.

Paris continues to bottom the Top 4, with supply at 156MW in Q3 2017 (Q3 2016: 129MW) and an availability of 27MW with take-up at 1.6MW.

For Q4, researchers project that 80MW of new supply will come online, including several brand-new companies such as datacenter.com, KAO and maincubes.

In addition, CBRE also expects investment activities to continue, with at least one major European investment closed out by the year-end.

Patel said: “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.

“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.”


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