|
New figures from CBRE’s Global Data Center Trends 2024 report show that North American data center vacancy has continued to trend lower after falling to 3.7% in the second half of 2023 – close to a record low. Though an updated rate for the entirety of NA was not disclosed in the most recent report, CBRE notes that some markets are experiencing vacancy below 1.0%. In Northern Virginia, a hotbed for data center activity, vacancy is now assessed at just 0.9%, down from 1.8% the year prior. The drop in availability has defied NA data center inventory growth of 24.4% YoY in Q1. Certainly, a lot of building is occurring, but capacity is absorbed quickly as it comes onto the market.
Throughout the first five months of 2024, Linklaters claims $22 billion was invested globally in data centers, on pace to easily surpass the $36 billion spent last year. Massive rounds of financing are now being lined up by private equity-backed developers to continue piling cash into these facilities, which form the key infrastructure powering an accelerated adoption of machine learning technologies.
CyrusOne this week announced the closing of a $7.9 billion Warehouse Credit Facility. That raise followed the completion of a $1.8 billion revolving credit financing in May, giving the company approximately $9.7 billion of additional debt capital to work with in designing and constructing data centers. CyrusOne, an REIT when it was acquired by KKR in 2022, operates more than 50 data centers in the US and Europe, will use the credit line primarily to fund development projects in the US.
Bloomberg reports that Brookfield-backed French data center group Data4 is exploring its own multi-billion debt deal, in talks with half-a-dozen banks to generate $2 billion in new financing. This comes roughly nine months after the firm secured a similarly-sized credit facility last October. Brookfield acquired Data4 in 2023 to expand its footprint to a current 135 data centers.
Private equity bets on data centers over the past few years, like Brookfield and KKR’s, appear to have been quite prudent amid the sudden rise in adoption of generative AI applications. CBRE’s most recent report shows average rental rates for a typical 250 to 500-kilowatt requirement across all four featured North American markets surged by 20% YoY. Private-equity firms accounted for more than 90% of an estimated $48 billion in global data-center mergers and acquisitions in 2022, up from a two-thirds share of a similar spend on global M&A deals in 2021, according to Synergy Research Group.
CoinDesk reports that PE firms chasing data center business for AI-related computing power are now looking at Bitcoin miners’ existing facilities and infrastructure as attractive options to expand their holdings of computing power resources. MRP last month highlighted the potential for crypto mining companies to dedicate some of their computational firepower toward powering AI in the cloud. Crypto-miners’ foray into the realm of more traditional data centers processes is not a particularly new development, but agreements between these enterprises and cloud computing providers are becoming more common and formalized. Major US miner Core Scientific inked a massive $3.5 billion deal with specialized cloud infrastructure provider CoreWeave, the largest private operator of GPUs in North America.
This arrangement will see Core Scientific provide CoreWeave with about 200 megawatts (MW) of infrastructure to power HPC services over the next 12 years; a big step up from a previous agreement between the two companies that extended 16 megawatts (MW) of infrastructure to Coreweave. Core Scientific claims to have at least 300 MW of additional HPC capacity available, which suggests non-mining processes could to take on a more than 41% share of the 1.2 gigawatts of operational capacity and contracted power at its disposal. The miner also owns a further 372MW of partially built infrastructure at its two Texas data centers. CoreWeave was so enthused about its Core Scientific partnership that it launched an unsolicited $1 billion bid for the whole company. This was shot down quickly by Core Scientific’s board, but it is unlikely to be the last M&A effort targeting Bitcoin miners.
Northern Data, a firm that specializes in high-performance computing (HPC) solutions and cryptocurrency mining, is reportedly preparing to list its cloud computing and data center business on the Nasdaq as early as in the first half of next year. Per Bloomberg, valuations for the potential IPO are ranging from $10 billion to $16 billion. Those figures were arrived at by comparing Northern Data to CoreWeave, which garnered private market valuation of $19 billion earlier this year.
Though financing and other sources of fundraising are plentiful for data centers right now, land and electricity are more constrained resources needed to complete construction. MRP has previously laid out an ongoing boom in utilities’ capex budgets that may coincide with a buildout of data centers across the US, positing that the electricity providers could soon become a lucrative AI trade. Investors can gain exposure to data centers and utilities via the Global X Data Center REITs & Digital Infrastructure ETF (VPN), Digital Realty Trust, Inc. (DLR), Equinix, Inc. (EQIX), and Utilities Select Sector SPDR Fund (XLU).
|
Leave a Reply