Data Center Growth: Increased Buyouts and Mergers Fueling Expansion
The data center industry is experiencing significant growth, with mergers and acquisitions (M&A) making headlines. However, in addition to M&A deals, asset-level transactions are also on the rise. According to JLL’s Capital Tracker, investment in APAC data centers saw a substantial 114% year-on-year increase to reach $2.8 billion in the third quarter of 2024.
One notable transaction was the sale of Hanam Data Center for KRW 734 billion by IGIS Asset Management, marking South Korea’s first-ever sale of a stabilized data center – a fully pre-committed and operational facility. Bob Tan, Executive Director of Capital Markets Transactions at JLL, explains that asset-level trades like this are uncommon, as data center operators typically prefer to own and develop their facilities. However, in countries like Japan and Korea, proactive investors have successfully secured land, power, and end-users, making asset-level deals more prevalent.
The primary driver behind the increased activity in the data center market, whether through individual asset transactions or large-scale M&A, is the strong demand from consumers, cloud service providers, and artificial intelligence. Tan emphasizes that limited asset availability, combined with favorable market conditions, has further fueled this surge in deal-making.
As the demand for data center services continues to grow, companies are looking to expand their operations and infrastructure to meet the needs of a digital world. This trend is not only driving M&A activity but also leading to an increase in asset-level transactions, where investors are seizing opportunities to acquire operational data centers.
Moreover, the rise of cloud computing, artificial intelligence, and other digital technologies is creating a robust market for data center services. As businesses rely more on data-intensive applications and services, the need for reliable and efficient data storage and processing facilities is becoming increasingly critical.
In conclusion, the data center industry is witnessing a period of significant expansion driven by a combination of factors, including increased demand from key sectors, limited asset availability, and favorable market conditions. As companies continue to invest in their digital infrastructure, we can expect to see further growth in both M&A deals and asset-level transactions in the coming years.
