Investing in the Rising Data Center Economy

This post was originally published on Data Center Knowledge

By Srini Bangalore, Arjita Bhan, Andrea Del Miglio, Pankaj Sachdeva, Vijay Sarma, Raman Sharma, and Bhargs Srivathsan

The explosion in demand for data centers has attracted the attention of investors of all types—growth capital, buyout, real estate, and, increasingly, infrastructure investors. In the US market alone, demand—measured by power consumption to reflect the number of servers a data center can house—is expected to reach 35 gigawatts (GW) by 2030, up from 17 GW in 2022, according to McKinsey analysis (Exhibit 1). The United States accounts for roughly 40 percent of the global market.

Data centers are typically owned and operated either by big companies (such as cloud vendors, banks, or telcos) for their own purposes or by co-location companies. The latter lease out the space and typically provide network capacity and power, as well as the cooling equipment that keeps down server temperatures. Tenants bring their own IT equipment. Data centers have attracted the interest of investors, often because of the steady, utility-like cash flows and risk-adjusted yields. In 2021, there were 209 data center deals, with an aggregate value of more than $48 billion, up some 40 percent from 2020, when the deals were worth $34 billion. In

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