A new type of asset has kindled the interest of the real estate sector, one of the assets that will lead market recovery: data centres.
What is a data centre? A data centre, as its name indicates, is a facility in which IT systems are homed with all the provisions necessary for their uninterrupted operations. They are provided with the appropriate infrastructure for their maintenance, such as refrigerators and climate control. The two essential elements of a data centre are energy and refrigeration, therefore, in order for data centres to operate normally both are needed in large quantities. The useful life of a data centre is between 20 and 30 years.
It is important to distinguish the different models of data centres we may encounter. The first is a data centre build and managed by companies for their own use. Secondly, those known as “colo” data centres, in which the companies that own the property, which has been adapted to set up a data centre, rent the space to third parties for the installation of their own equipment. In these cases the maintenance of the equipment is carried out by the owner of the data centre. Third and lastly are the data centres build, managed and made available to third parties by a company so that they use the equipment and infrastructure, but without renting the space.
The chosen data centre model would involve different investment requirements and real estate aspects. However, in general, the main characteristic of real estate investment in data centres is that the investment in the property is lower than that of the equipment and installation. The legal coverage acts the same. Even though the property is important, the legal aspects regarding the protection of servers and, depending on the case, the renting of the space or provision of services also have significant relevance that must be taken into account when investing.
The obligation to spend more time at home due to the health crisis caused by COVID-19 has given rise to an exponential increase in: the demand of data speed and capacity, subscriptions to streaming services, the use of communication platforms and the average broadband use at home. In business terms, the tendency to outsource, the importance of company data and the aggressive growth of cloud technology are causing a restructuring of the logistics sector with increased investment in data centres coming from private capital and infrastructure funds. Even though investment in data centres was certainly rising before the pandemic, the increase in demand has lead to the consolidation of this new type of asset.
The Spanish Congress, a principal actor in the data centre sector, met on 7 October 2020 to discuss its future. An investment of 9,000 million Euros is expected in Spain within the next five years. Therefore, the consensus is that one of the main assets for real estate investment will be data centres and that 2021 will generate many business opportunities.
