Global data is on the rise. Before the COVID-19 global pandemic, the online world was nearly omnipresent, making the transmission, storage and processing of data consumption paramount for both work and home life. Now, capable IT infrastructure is at the core of day-to-day life in a way it never has been before.
With data being one of the most valued assets of our era, it’s clear why data centers (a foundational infrastructure that enables the effective storage of compute gear ensuring effective processing and data exchange) are crucial. Still, if we ask what makes these facilities marketable from a sale, merger or acquisition level — and how these evaluations are changing given recent disruptions — do we really know what makes a data center valuable?
This is one of the questions that the Independent Data Center Alliance (IND-DCA), a consortium of global independent data center operators collaborating to create single-sourced solutions for buyers, answered for audiences at The 2020 INCOMPAS Show, which took place online from September 14-16, 2020. IND-DCA organized the panel titled, “Data Center Valuations: From shell/core to network connectivity, what makes a data center valuable or invaluable in the markets they serve?”, which brought leading investment bankers and valuation experts together to provide insights. The panelists included Rich Lukaj, senior managing director of Bank Street Group; Tom Watts, Managing Partner of private equity firm Radius Capital and Daniel English, Co-Founder and President of Legacy Investing. The panel was moderated by Miles Loo, Jr., the Global Valuation and Advisory Data Center lead for Newmark Knight Frank.
The discussion started with Loo acknowledging how the total value of data center-related merger and acquisitions deals closed in the first quarter of 2020 has already surpassed that of 2019, despite the pandemic crisis. English notes that appetite from investors remains strong because of the consumer’s appetite for technology, which has gone largely unaffected by the pandemic. He observes that every digital device or service that the consumer plugs in to has to ultimately flow through a data center, or through a fiber network that lives in a carrier hotel or connects in a carrier hotel, which means that the need for these facilities is ever-increasing. Furthermore, the IT infrastructure asset classes have been outperforming more typical real estate assets as things like offices and retail locations suffer from pandemic protocols. For the communications infrastructure sector, it’s a fortunate truth that data centers remain resilient in a way that many other assets are unable to.
So, if deal making remains strong, how has the process of closing these deals changed in light of social distancing and quarantines? Lukaj explains how, when looking at international deals, the feet on the ground in these other locations is what drives the process forward. The use of digital video and online conferencing has also worked wonders for the data center sector just as it has come to support many organizations across the globe.
In terms of other considerations for a changing world of data center valuations, as the workforce goes remote, the emphasis on where the asset lies comes into focus. So, is edge driving investment for its ability to get data closer to home and ensure better performance for a distributed workforce? Watts observes that when it comes to investing in the edge, it’s not just about the data center. He notes that creating success comes down to a combination of the data center at the edge of the network and the connectivity between the edge and the core network. Understanding how the traffic has to be managed is central to considering how this new edge will take shape.
Overall, the considerations for a data center valuations and the conditions within which the facility is constructed, operated, bought and sold may be changing, but the value of a data center is rooted in a firm foundation. This foundation is the fundamental truth that data is at the core of our lives in this digital era and will continue to grow in importance.
To view the panel in its entirety, please click here.