Florian Glock
Karsten Jungk - Wüest&Partner
‘In just two years, the so-called ‘baby boomer’ generation will gradually come into retirement age so, demographically, there will be an extraordinarily high demand for new care facilities by 2050,’ said Karsten Jungk, managing director and partner at Wüest Partner Germany.
The market for data centres in Germany is rapidly evolving from a niche special-interest segment to a recognized independent asset class for institutional investors. The market has doubled in size since 2015, and depending on type and size of building, is yielding between 5% and 9%.
These were the central conclusions of a recent online press conference, hosted by Karsten Jungk, the CEO of Wüest Partner Deutschland; Holger Weber, the head of research at Cologne-based developer Art-Invest; and Oliver Menzel, the CEO of German data centre provider Maincubes.
Investment in the infrastructure of data centres in Germany is rising rapidly. In 2017 more than a billion euros flowed into the sector, up from €750 only three years ago. More than €8bn is being invested annually in the construction, modernization and IT infrastructure of data centres, while the share of co-location data centres which house the supporting technology for the main building is estimated to make up about 40% of all IT space in Germany by 2020, according to the Berlin-based Borderstep Institute, an innovation and sustainability consultancy.
The volume of data is expected to grow from 40 Zettabyte (ZB) to 163 Zettabyte by 2025, while the space used by German data centres will rise by 18.5% to 3.14m sqm by 2020. The largest European markets currently are London (482 Megawatt (MW) of performance), Frankfurt (279 MW), Amsterdam (244 MW) and Paris (156 MW). However, due to obsolescence and the need to keep existing space accessible for short-term demand, the level of vacancy is also high, put at between 13.4% and 25% at any given time.
The press conference heard that because of the complex demands of fully-equipped data centres, it’s not feasible to achieve building costs of below €10,000 per sqm. Investors need to figure on at least €15,000 to €20,000 per sqm construction costs, plus further high costs for technical equipment and expensive insurance against operating downtime. There are also numerous extra considerations depending on location and the peculiarities of the building itself, including high capacity internet access and heavy electricity usage, in addition to hefty security overheads.
According to Wüest & Partner’s Karsten Jungk, “The market for data centres has hitherto been very intransparent, with primarily specialized REITs active in the market. So accurate figures on yields are hard to come by, and are very much dependent on each individual investment.”
The yield potential of a classic Shell & Core-object, without any of the technical fit-out, is about 5% to 6.5%, says Jungk. Co-location data centres, with all the necessary support technology, are offering more like 6.5% to 9%, said Weber of Art-Invest.
Oliver Menzel of Maincubes said, “The ongoing process of digitization is not only demanding more and more data volume, but the regional availability of data centres is also playing a big role in deciding the future of new digital technologies. Hence rural districts have a new role to play in determining the regional distribution of particularly smaller data centres.” These can be used to support the data capacity of the larger centres such as Frankfurt, he said. His company Maincubes is currently building new centres across Germany, Ireland and Switzerland.