During the first half of 2018, activity in the data center investment market did not match that of 2017, although sustained demand is fueling a positive outlook for this sector. Mergers & acquisitions (M&A) activity reached approximately $6 billion globally during Q1 and Q2.

In the NY Metro area, activity included the GI Partners acquisition of the BT Radianz facility in Nutley, NJ, for nearly $43 million. Across the U.S., some of the larger completed transactions for this time period, and valued at approximately $3 billion, include:

  • Iron Mountain closed on IO Data Center in Phoenix, Dayton, and Edison, NJ, valued at $1.1 billion
  • Equinix bought Infomart in Dallas, valued at $800 million
  • IPI Partners, which is backed by Iron Point Partners and Iconiq Capital, purchased three Infomart assets outside of Dallas, for over an estimated nine figure sum
  • Carter Validus purchased two data centers in Rancho Cordova, CA valued at $51 million
  • AT&T Colocation Business agreed to sell 31 data centers in the U.S. and abroad to Brookfield Infrastructure Partners for $1.1 billion, but the closing was delayed past the first half
  • CBRE Investors acquired an Amazon data center complex in Sterling, Northern Virginia from developer Duke Realty for nearly $112 million
  • Legacy Investing acquired a $64 million ETrade data center in Atlanta from Carter Validus

In Europe and Asia, activity was slightly higher with $2.9 billion sold; almost one-third to a half of the buyers were U.S. companies. Three top transactions include:

  • Equinix purchased Metronode for $791 million bringing the footprint in Australia to a total of 15 data centers located in Sydney, Melbourne, Perth, Canberra, Adelaide, and Brisbane to name a few
  • CyrusOne bought Zenium for $442 million in London and Frankfurt
  • Iron Mountain bought EvoSwitch in Amsterdam for $235 million

Data center expansion by cloud companies, such as AWS, Azure, Google, IBM, and Oracle, is shifting to a rapid growth mode. We are aware of approximately 50 to 70 projects in which cloud companies are building, or planning to build, single data centers or large campuses to accommodate five to 15 data center buildings at 100,000 sq ft to 300,000 sq ft each. These new Class “A” Tier 3 data centers will trade between  4.5% to 5% Cap Rate because of demand from new investors and the credit of the tenant.



The corporate-owned data center asset class continues to grow as well. At Cushman & Wakefield, our data center team has successfully completed a number of sale leasebacks for corporations looking to outsource and lower operating expenses. Three of our corporate data center sale leaseback transactions were for GlaxoSmithKline in Collegeville, PA; Ericsson Global ICT Center, Vaudreuil-Dorion, Canada; and The Coca-Cola Companies in Atlanta.



M&A transactions will continue to occur in 2018 and beyond, but we see this more in the second and third tier markets. Colocation absorption rates, which include the cloud providers, have reached record highs, with 357.85MW in the top U.S. markets and 46.3MW in the top Canadian markets.

One of the key, overarching trends is the sustained reliance on the data center. In fact, this reliance continues to grow, although more workloads are shifting from on-premises facilities to multi-tenant sites. The larger drivers in this trend are the hyper-scale cloud providers, edge computing, and hybrid cloud demand from corporations.

At a recent Bisnow Data Center Conference, it was noted that the U.S. will need 4,000 more data centers at approximately 200k sq ft, 25MW facilities each by 2020 because the U.S., as well as countries around the globe, are creating 600 new zettabytes of data each year, which is about 200% more traffic than current data centers can handle. This is all being created by workloads and a range of factors, including moving to the cloud or colocation, 5G and latency speeding up the process for all services, wireless connectivity meeting the edge, AI coming from every device, emerging markets coming into the digital age, and the next generation tech explosion.

Many large markets including Northern Virginia, Dallas, Chicago, Phoenix, and Atlanta will soon be at or near double their current size, creating a large supply for prospective investors.

This, combined with the need for more centers at the edge, could lead to further capital outlay from a variety of sources over the next two to five years.

Given the robust activity, several new investors have been drawn into the market. Those include net leased funds, family offices, private equity, pension funds, data center providers, private investors, insurance companies, REITs, 1031 Exchange and Sovereign Wealth Funds that Cushman & Wakefield can access on clients’ behalf. Overall, the outlook continues to remain positive for data center investment in response to market demand.