GIC and Equinix are pumping an additional $ 3.9 billion into data centers
Singapore-based sovereign wealth fund GIC has signed additional joint ventures with digital infrastructure company Equinix to pump $ 3.9 billion into a global data center portfolio that will serve some of the world’s largest cloud service providers.
When the data center portfolio called xScale is complete, it will include more than 32 properties valued at more than $ 6.9 billion in places like Europe, Asia Pacific and the Americas, Equinix said this week. Equinix already has more than 220 data centers worldwide.
The portfolio will serve some of the world’s largest cloud service providers, including Alibaba Cloud, Amazon Web Services, Google Cloud, IBM Cloud, Microsoft Azure and Oracle Cloud Infrastructure.
In general, data center properties make up a relatively small part of an institutional investor’s portfolio. But the investments have grown in popularity significantly in recent years. Advances in cloud technology helped the asset class.
While other real estate investments such as commercial property fell off in 2020, investors were looking for niche investments that were unaffected by the pandemic. Last year, data center real estate investment trusts (REITs) grew 21% for the full 12 months, according to the National Association of Real Estate Investment Trusts (Nareit). Compare that to office investment, which fell 18% over the same period.
Still, data centers didn’t move as quickly in 2021. Data center REITs are up only 5.4% so far this year, while office REITs have made up some ground again with a 15% increase.
Data center real estate is a complicated investment that can be managed without the right expertise. Location matters. The most coveted spots around the globe are on broadband pipes, many of which have already been claimed by tech giants. Availability also plays a role. With the world’s best cloud service providers, data centers are measured by how constantly they are operated, down to a fraction of a percentage point.
But activity in investments continues. In its annual report last year, GIC announced its interest in data centers.
Upon completion of the xScale deals, expected later in 2021, GIC would hold an 80 percent stake in future joint ventures; Equinix will own the remaining 20% of the shares.
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