Singapore sovereign wealth fund GIC has signed up for more joint ventures with digital infrastructure firm Equinix to pump $3.9 billion into a global data center portfolio that will service some of the world’s largest cloud service providers.
When the data center portfolio called xScale is completed, it will hold more than 32 properties that are collectively valued at more than $6.9 billion, in places such as Europe, Asia-Pacific, and the Americas, Equinix said this week. Equinix already has more than 220 data centers around the world.
The portfolio will service 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.
Generally speaking, data center properties count for a relatively small part of an institutional investor’s portfolio. But the investments have soared in popularity in recent years. Advances in cloud technology helped the asset class.
During 2020, while other real estate assets such as commercial properties fell off, investors sought out the niche assets that were unaffected by the pandemic. Last year, data center real estate investment trusts (REITs) advanced 21% over the whole 12 months, according to the National Association of Real Estate Investment Trusts, or Nareit. Compare that with office investments, which dropped 18% over the same time period.
Still, data centers have not advanced as quickly in 2021. Data center REITs have jumped just 5.4% so far this year, while office REITs have recovered some ground with a 15% increase.
Data center properties are complicated investments to manage without the right expertise. Location matters. The most desirable spots around the globe are located by broadband pipes, many of which have already been claimed by tech giants. Uptime also matters. For the world’s best cloud service providers, data centers are measured by how consistently they run, down to a fraction of a percentage point.
But activity in the investments continues. In its annual report, GIC said last year that it is interested in data centers.
After the xScale deals are closed, which is expected to occur over the course of 2021, GIC would own an 80% equity interest in future joint ventures; Equinix will own the remaining 20% equity interest.