Once overlooked, data centres have now been placed firmly on the map. Data usage has spiked as a result of the Covid-19 lockdowns, according to the International Energy Agency, with global internet traffic rising by almost 40% between February and mid-April.
The role data centres have played in helping the world navigate its way through the pandemic has been vital. Knight Frank senior partner and group chairman Alistair Elliott tells EG that data centres have emerged as a “beacon” following the pandemic – and the agent is now looking to bet big on the sector.
To tap into this emerging market, Knight Frank set up two dedicated data centres teams in the EMEA and APAC regions in June, offering investment, site transaction and occupier advisory services.
The EMEA team is led by former CBRE associate director Stephen Beard, who was hired by Knight Frank in May to lead the team in its efforts to establish the company as the “go-to global data centre adviser”. Singapore-based occupier services director Adeline Liew will lead the APAC team.
A 14-strong data centre team has already been established in the US, where Beard says the market is “more mature”. This is led by Bryan Loewen. Overall, the data centres team consists of 40 capital markets agents globally.
“We have been dipping our toe in the water around various businesses in the world without much strategic intent,” says Elliott. “But we decided, in order to embrace this, to make a strategic move to develop a data centre capability.”
From ad hoc to strategic expansion
The agent is targeting expansion in the “tier one” markets of Amsterdam, Frankfurt, London and Paris in Europe, as well as Singapore, Sydney, Tokyo and Hong Kong in the APAC region.
It also aims to enter into what Beard calls the “opportunity markets” of Warsaw, Zurich, Copenhagen, Munich and Milan, as well as various locations in the APAC region including Shanghai, Beijing, Mumbai, Chennai, Kuala Lumpur and Bangkok.
These emerging markets are where operators have the opportunity to make real profit, says Beard, because supply in these regions falls short of the demand for data centre space. “It’s a very large market to go at,” he says.
Future plans
While Elliott does not disclose the revenue targets for its new data centre division, nor how much the business is aiming to grow headcount, he says the agent is committed to making data centres a strategic part of Knight Frank’s future.
“Because we operate a medium to long-term model, success for us is consistent profits over time,” he says. “We’re not ridiculously demanding on year one or two, we just need to know that we’re building a long-term sustainable model that is going to add to our service offering over time.”
For Elliott, it is an opportune time to be targeting data centres. “It’s clearly a burgeoning sector that seems to have a very positive future,” Elliott says. While retail, hospitality, food and beverage and offices are all experiencing “tensions and stresses”, data centres have emerged as an alternative asset class for which the business case is strong.
Beard believes that there is a gap in the market that Knight Frank can fill in terms of data centre advisory services.
“Most other real estate houses offer some sort of data centre advisory,” he says. “But I strongly believe the structure we’re looking to implement… is a fresh forward-thinking alternative the market needs.”
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