Globally, there are more than 50 real estate funds currently capital raising and actively seeking exposure to data centres, with a combined target size of over US$50 billion – 40% of this total capital is being raised specifically to invest in data centres, at over US$20 billion.
Data centres are increasingly being targeted by real estate fund managers, as other asset classes, such as offices and retail, face more challenging environments. Globally, there are more than 50 real estate funds currently capital raising and actively seeking exposure to data centres, with a combined target size of over US$50 billion. According to analysis by global law firm, Linklaters, 40% of this total capital is being raised specifically to invest in data centres, with the remainder being raised to invest across real estate asset classes, including data centres.
The number of real estate funds raised with a focus including data centres has increased consistently over the last few years, with a record amount raised in 2023. There is currently a marked increase in funds exclusively focused on data centres. The significant amount of capital being raised suggests that investor appetite in the sector is growing.
The Digital Transformation of global economies – in particular, the widespread uptake of AI technologies and an insatiable appetite for cloud space – has fuelled exponential growth in digital infrastructure needs. This spike in demand has presented opportunities across the real estate sector for developers, contractors and consultants through to investors, fund managers and lenders.
David Martin, Partner and Co-Head of Linklaters’ Digital Infrastructure offering, said: “Our data needs are higher than ever and as a result we are seeing data centres being developed on an increasingly global scale, from Europe to the US, Asia and the Middle East. The sector presents exciting opportunities for both the private and public markets in terms of equity investment.
“A crucial consideration is ensuring a clear exit strategy and whether we start seeing public market listings, alongside more traditional exit routes such as asset sales, will be an interesting trend to watch. As data centre projects mature and we see more players getting involved and progressively innovative financing and investment opportunities, we expect private equity and financial sponsors to continue to be a driving force behind much of the sector’s activity,” added Martin.
“As our research clearly shows, the growing demand for digital infrastructure presents an exciting opportunity for both investors and fund managers,” said Ben Jennings, Investment Funds Partner. “In response, we’re seeing fund structures that are tailored to accommodate the specific needs of data centre investments, such as higher upfront capital requirements and longer investment periods. Hybrid fund structures that balance development and operational phases can appeal to a broader range of investors and can be designed to combine elements and concepts from both private equity for the high-growth phase and infrastructure funds for lower-risk, income-generating assets.
“As the sector’s growth, driven by evolving technology and the global AI boom, continues to fuel investment, we can expect to see more appetite from fund managers and record amounts of private capital earmarked for the sector,” Jennings added.
Ross Schloeffel, Energy & Infrastructure Partner, said: “Driven by the rapid growth in data consumption, the financing of data centres has become increasingly appealing to a range of different finance providers. Data centre projects offer stable, long-term returns, particularly where supported by highly creditworthy hyperscale customer contracts. The debt products available to support the significant capital requirements of data centre platforms are expanding.
“While more traditional project or real estate financing structures will continue to be appropriate for some sponsors, we’re seeing a shift toward highly flexible ‘infrastructure’ debt packages across the European market. For stabilised data centre assets, securitisation structures are also set to become more common as an option to refinance shorter-term bank debt,” added Schloefell.
Jack Shand, Managing Associate, Real Estate, said: “Long-standing real estate investors and developers are increasingly seeking exposure to the sector. Traditional property stalwarts bring expertise in construction and development, and many have access to extensive landbanks to help unlock data centre developments where land supply is constrained. However, data centres present unique challenges. Operations are often highly technical and specialised, requiring expertise either in-house or through joint ventures with experienced operators.
“Data centre tenants and occupiers are also different: from global hyperscalers with exacting requirements to young companies with untested covenant strengths. Investor exit strategies should be considered from the outset, ideally including flexibility for asset disposals or co-investment models. As investment platforms evolve, consideration should be given to bifurcating development and stabilised assets to rationalise operations and maximise investment and debt opportunities,” Shand added.
Linklaters is at the cutting edge of the digital infrastructure sector and the remit of the team has widened as the market has grown to incorporate a growing number of digital infrastructure assets, including data centres, fibre, towers, digital advertising and satellites.
These transactions often involve multiple complexities of bespoke corporate and financing structures, an increasingly regulated investment sector, and complex development and offtake contracts driving value, playing into the combined strengths of its market-leading corporate, real estate, finance, telecoms and regulatory teams.
In 2024, Linklaters has already been involved in several landmark deals including advising Ardian on the acquisition of leading data centre platform Verne; Brookfield’s acquisition of the Data4 data centre from AXA Investment Managers Real Assets for US$3.8 billion; and EXA Infrastructure sale of seven Edge data centres in Europe. The platform also continues to advise DigitalBridge and Vantage Data Centers:
- In connection with Silver Lake and DigitalBridge’s investment across North America and EMEA
- On the completion of a €2.5 billion investment partnership with an investor consortium to accelerate growth in EMEA
- On AustralianSuper’s €1.5 billion investment in Vantage’s EMEA platform for a significant minority stake
- DigitalBridge’s joint venture with Liberty Global and Telefonica to create AtlasEdge
