As demand for cloud storage grows, more private-equity firms are buying up data centers.
- Last year, private-equity firms bought up a near-record number of data centers as the demand for cloud storage and computing grows.
- Firms’ eagerness to own data centers is good for tech leaders as the surge in demand allows them to increase the rates at data centers.
- Monthly rates at data centers grew 14.6% last year, The Wall Street Journal reports.
Part of that price increase was due to rising construction and labor costs, though reduced supply played a major role.
Why it’s news
Demand for cloud storage and computing is rising, and private-equity firms are quickly taking advantage of the opportunity. Data-center prices are growing, but increased investor capital could prevent the prices from spiraling out of control. Investments from these firms to expand existing data centers or build new ones to meet growing demand would help keep prices balanced.
Last year, private-equity firms were responsible for 90% of global data-center mergers and acquisitions—an estimated value of $44 billion. That number is 66% higher than the year before, The Wall Street Journal reports.
Investors come from a variety of backgrounds and industries rather than just one sector. Some are backed by family offices, pension funds, and sovereign wealth funds. The investors include those in commercial real estate, technology, and infrastructure sectors.
Data centers represent an instrumental part of digital infrastructure. These warehouse-like computer facilities support everything from remote work infrastructure to video game streaming.
Companies like Amazon and Microsoft are already major players in the data center game. The companies own their own data centers and rent out spaces to other companies. Though these tech giants take up plenty of space, 10 out of the last 12 largest data center acquisitions were attributed to private buyers rather than a tech giant, The Wall Street Journal reports.
In December, Florida private-equity firm DigitalBridge Group acquired Dallas data center operator Switch for nearly $11 billion. In March, New York private-equity firm KKR acquired data center operator CyrusOne for around $15 billion.