Lendlease invests $1b in data centres

Lendlease invests $1b in data centres

5 July 2019

Leading international property and infrastructure group, Lendlease, has announced a partnership to invest in data centres across the Asia Pacific region.

The partnership will be funded 20 per cent by Lendlease and 80 per cent by a large institutional investor. The initial equity commitment by the parties is US$500 million, combined with leverage will enable the partnership to invest US$1 billion in the sector.

Completed assets and new development opportunities will be targeted across Australia, China, Japan, Malaysia and Singapore – all markets in which  Lendlease has a significant presence.

Lendlease’s integrated capability across development, construction and investment is well placed to execute on the significant growth forecast for the data centre sector. Accordingly, Lendlease has been appointed as development, construction, property and investment manager for the partnership.

Lendlease’s CEO Asia Tony Lombardo said, “A data centre platform is a strategic fit for the Group, aligning with our targeted key trend of infrastructure, our telecommunications strategy and our integrated business model. This partnership will enable us to leverage our track record of project managing, designing and building data centres with the strong growth potential for this sector, which is evolving into a mainstream real estate asset class.”

The partnership is Lendlease’s second venture in the fast-growing data centre and telecom sector.

Demand for data centres is being driven by accelerated growth in what is known as “multi-cloud” adoption around the world, and will be further accelerated with the roll-out of 5G, according to a JLL report on the global data centre outlook.

Singapore, with 44MW of data centres currently under construction, leads the Asia-Pacific region in cloud providers, while locally, groups including NextDC, Digital Realty, Global Switch and Equinix are expanding data centres to meet the increasing demand, reports The Urban Developer.

Data centres have been an exciting asset class for investors in recent years, as the increasing dependence on cloud storage creates an unremitting demand for space to store data.

As the world becomes increasingly reliant on the internet — and mobile usage in particular — data is being seen less as a measure of information and more a public utility, like water or gas.

The data centre market continues to grow with infrastructure needed to support the likes of Microsoft Azure, Amazon Web Services, Google Cloud and Alibaba Cloud.

The sector has grown steadily, averaging 12.2 per cent annually over the past five years within Australia, and is worth an estimated $2.5 billion.

The Asia Pacific has been identified as one of the key growth regions internationally as major corporations step up their use of cloud storage, and Singapore has been a leader in the region.

Earlier this year Nasdaq-listed data centre giant Equinix announced it would spend $225 million to build its largest Australian facility in Sydney after already paying more than $1 billion in 2017 to buy local provider Metronode, while Singapore digital start-up AirTrunk raised $400 million in 2017 to fund the construction of its flagship centres in Sydney and Melbourne, notes The Australian Financial Review.

Sites appropriate for building data centres are, however, becoming harder to come by in Australia with land prices in industrial-zoned areas doubling in some inner-suburban and fringe CBD markets in Sydney and Melbourne as developers battle it out for prime sites for competing uses such as apartment living, self-storage, warehouses and offices.

Lendlease said the commencement of its partnership to invest in data centres was subject to the relevant regulatory approvals.