As reported in GlobeSt.com earlier this week, the data center industry is set to continue the energetic expansion seen over the last several years. The industry’s big players will also continue to complete a large number of mergers and acquisitions. In fact, according to JLL’srecently-published 2018 Data Center Outlook, that particular trend could accelerate.
Data center clients increasingly want companies that can provide the entire range of services they might need. Therefore, the most successful data center firms will be the ones that can manage and design centers, and implement solutions for a variety of clients in many geographic areas.
“Some of the companies don’t have all of these capabilities in-house,” Mason Mularoni, a Boston-based senior research analyst with JLL, tells GlobeSt.com. And acquiring capabilities, rather than the more simple acquisition of new data center facilities, will drive this activity for the foreseeable future.
The company reports that 48 deals occurred in 2017, totaling nearly $20 billion, or more than the 2015 and 2016 volumes combined. In one of the largest deals, data center REIT Digital Realty, based in San Francisco, and DuPont Fabros in Washington, DC, merged in an all-stock transaction worth $7.6 billion. Cyxtera Technologies was formed in a $2.8 billion deal out of BC Partners, Medina Capital and CenturyLink. And Peak 10 acquired ViaWest in a $1.7 billion deal, while Digital Bridge acquired Vantage for $1.0 billion.
Each of the past several years has seen one major shift in the market, Mularoni adds. In 2016, the demand for cloud services skyrocketed, fueling a building boom that has not ended. In 2017, US firms began expanding overseas into Europe and Asia. And 2018 promises to be the year that foreign firms, especially Chinese ones, seek to get a piece of the valuable North American markets.
“We’re going to see some of the Chinese companies that have grown so well in their own world expand out to ours as well,” he says. JLL expects China’s data center industry, which includes such firms as Alibaba, Tencent, Baidu, and GDS, to grow at an annual rate of 13% over the next four years.
But to grow outside of China, these firms will most likely seek out US and Canadian partners to help navigate the unfamiliar terrain. Alibaba, for example, has tried expanding overseas, and “it’s been a difficult journey for them,” says Mark Bauer, JLL’s managing director and data center solutions co-lead.
Some partnerships have already emerged, including GDS and CyrusOne, GCBD and Apple, and Beijing Sinnet Technology with Amazon. And JLL advises everyone to “keep an eye out in 2018 for continued progress and dynamic changes on the international front.”
