The data center and colocation market was one of the most robust sectors in 2020, and it continues to have strong growth projections in 2021 and beyond. In this blog, we will take a look at the biggest stories in data center real estate and site selection over the past year.
COVID-19 tests the reliability of the network and it passes
As office buildings and classrooms emptied and work-from–home (WFH) initiatives were implemented in early 2020, network traffic saw a dramatic spike related to remote office and online education as well as increased gaming and video streaming.
The changes in social behavior to combat the spread of COVID-19 also underscored the significant role that digital infrastructure was playing amid the pandemic.
For the global hyperscale cloud providers, colocation operators and enterprise data center corporations, the pandemic represented the most significant crisis in their careers. While the healthcare community was at the frontline to fight the pandemic, the IT community has proven to be its own essential frontline by allowing many businesses to continue to operate successfully in the WFH model.
Despite the surge in IT demand globally, the stress test to the overall network has been largely successful and resilient. In 2020, there have been no notable deterioration or crashes of any cloud, colocation or enterprise networks globally. With the exception of some throttling down when needed in Europe, the global internet is thriving.
Data center and colocation real estate was a hot sector for investment and M&A
Just a few years ago, the data center and colocation class was considered a risky sector given the significant upfront investment in a single location, as compared to spreading the same investment across a broader portfolio of asset classes such as office space and retail. The perspective for data center real estate has certainly changed as investors now realize its critical importance and consider it a defensive strategy in a real estate downturn. The pandemic has only reinforced this asset class as it ascended to one of the top-performing in 2020. In the United States, four of the top 10 performing real estate investment trusts (REITs) during the pandemic were data center REITs.
Data center M&A rises
Data center mergers and aquisitions are also up in 2020. The total 2020 M&A deal volume exceeded $30 billion, boosted by Digital Realty’s $8.5 billion purchase of Interxion and DataBank’s $1.4 billion acquisition of zColo’s business, according to Synergy Research. The trend should continue as private equity firms infuse cash into the data center industry.
Last year posed challenges for everyone in every facet of their lives. The good news is that the data center and colocation sector successfully made lemonade out of lemons.