Valuing Data Centres: Insights into the Digital Infrastructure Revolution 

Abhinav Sharma, Partner at Reliant Surveyors, believes that data centres play a critical role in shaping the digital future

In the era of rapid digital transformation, data has become the currency of innovation, driving commerce, connectivity, and technological breakthroughs. At the core of this revolution are data centres—advanced real estate infrastructures that store, process, and disseminate vast volumes of information. The valuation of data centres is now a critical exercise, reflecting their strategic significance in the global economy and their pivotal role in shaping the digital future.

Global Data Centre Landscape: Powering the Digital Age
The global data centre ecosystem is vast, comprising approximately 8,000 physical facilities as of 2022, according to the U.S. International Trade Commission (USITC). These facilities form the backbone of modern technology, supporting cloud computing, artificial intelligence (AI), Internet of Things (IoT) devices, and beyond. Their impact extends beyond tech innovation—they have become indispensable economic assets.

Valuing data centres involves a nuanced integration of real estate, technology, and business considerations. Several approaches are commonly utilised:

1. Income Approach: This method focuses on the revenue potential and operating expenses of the data centre. Key steps include analysing lease agreements (e.g., colocation revenue), forecasting income from managed services, estimating operating costs, and applying appropriate discount rates to calculate the Net Present Value (NPV). Metrics such as Power Usage Effectiveness (PUE), tenant churn, and occupancy rates are critical.
   - Source: Deloitte. (2021). Valuing Digital Infrastructure: Data Centres

2. Market Approach: This relies on comparable transactions by identifying similar data centre sales and adjusting for factors like location, age, capacity, and technology. This method often faces challenges due to the lack of transparency in private sales.
   - Source: CBRE. (2023). Global Data Centre Report

3. Cost Approach: Focused on replacement costs, this method calculates the cost of land acquisition, construction, IT hardware, and software while subtracting depreciation based on usage and obsolescence. This approach is particularly relevant in emerging markets.
   - Source: Turner & Townsend. (2022). International Construction Costs

Market Growth and Regional Trends
The global data centre market, valued at $249 billion in 2023, is expected to soar to $399 billion by 2029. Hyperscale data centres, designed for scalable applications, are leading this growth with a remarkable compound annual growth rate (CAGR) of 27.9%. By 2032, this segment alone is forecasted to exceed $935 billion.

The capacity of these centres is anticipated to reach 171-219 gigawatts (GW) by 2030, driven by increasing demand for efficient, sustainable, and scalable infrastructure. The GCC region is emerging as a significant player, with a projected market size of $5.3 billion by 2031 and a CAGR of 8.8%. Among GCC nations, the UAE is at the forefront, leveraging its strategic location, cutting-edge infrastructure, and government-backed initiatives to attract global investments.

As this growth takes place, the data centre markets differ regionally, each shaped by unique characteristics that influence the development and valuation of data centres.

• North America: A mature market with high colocation demand, dominated by tech hubs like Silicon Valley.
• Europe: Compliance with green energy initiatives such as EU taxonomy influences valuations. Key markets include London, Frankfurt, Amsterdam, Paris, and Dublin (FLAP-D).
• Asia-Pacific: Growth is fueled by cloud adoption and mobile internet, with emerging markets like India and Vietnam showing promise.
• Middle East & Africa: Hyperscale data centre investments are growing, driven by renewable energy solutions to reduce cooling costs.

While these regions exhibit diverse growth patterns, valuing data centres presents several challenges due to high capital requirements for construction and maintenance, which demand substantial investments. Additionally, their high energy consumption necessitates sustainable solutions to manage costs, while navigating global and local regulations adds layers of compliance complexity. Moreover, the rapid pace of technological advancements can lead to obsolescence, impacting long-term valuations and requiring continuous upgrades to maintain their competitive edge.

UAE: A Regional Leader in the Data Centre Market
The UAE has positioned itself as a leader in the GCC’s data centre market, spearheading regional growth with strategic initiatives. Dubai, in particular, has emerged as a global technology hub, leveraging its connectivity, advanced infrastructure, and pro-business policies.

The UAE’s data centre growth is driven by key differentiators, including a strong commitment to sustainability with initiatives like solar-powered data centres, which highlight the nation’s focus on renewable energy and environmental stewardship. Strategic investments in workforce development and renewable energy further enhance the value of local data centres.

Additionally, the UAE’s strategic geographic location as a gateway between East and West positions it as a preferred hub for global tech firms. These factors have attracted significant international investment, driving economic growth and reinforcing the UAE's leadership in digital infrastructure. Thus, as the global economy increasingly relies on digital infrastructure, data centres have become indispensable pillars of growth. The UAE, with its forward-thinking policies, advanced infrastructure, and focus on sustainability, stands out as a beacon of innovation in the GCC. For investors and stakeholders, the UAE presents a unique opportunity to tap into a rapidly expanding market driven by a blend of technological advancement and economic foresight. By focusing on scalable, efficient, and green solutions, the UAE is setting new benchmarks for the valuation and growth of data centres in the digital age.

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