DLA Piper says $21.3bn has already been invested in data centres this year, with energy security and ESG issues taking a greater focus among executives.
Global investment into data centres is showing no signs of slowing down despite economic and geopolitical issues, according to a new report by law firm DLA Piper.
The DLA Piper report found that the value of global data centre investment more than doubled last year, reaching $59.5bn, while the number of transactions in this space increased by 64pc.
This growth trend looks set to continue in 2022, as there have been 41 transactions recorded so far this year worth $21.3bn. The report said this is a 100pc increase compared to the same period last year.
Demand for data centres appears to be driven by the growth of hyperscalers for companies such as Meta, Google and Microsoft. The report said these companies benefitted from the global transition to cloud services, which was escalated by the Covid-19 pandemic.
This point was also raised last December by Eaton’s Ciarán Forde, who wrote that the Covid-19 pandemic led to changes that are likely “irreversible” and that increased reliance on data centres is here to stay.
Ireland has increasingly become a location for data centre investment. In 2020, TikTok joined tech giants such as Google, AWS and Microsoft in selecting the country as a data hub.
A Host in Ireland report that year found hyperscalers made up 80pc of Ireland’s data centre capacity. It also found that, while other areas of the economy had been hit hard by Covid-19, data centres had been left largely unscathed.
Energy and climate concerns
For its report, DLA Piper surveyed 100 senior executives from infrastructure, equity and debt provider firms and data centre developers.
The law firm said that 45pc of developers, 56pc of debt providers and 67pc of equity investors plan to invest in four or more data centres over the next two years. This marks an increase in investment planning from all three groups compared to results of a similar survey in 2020.
The report also found that energy security and ESG issues are becoming “significant factors” that are shaping data centre investment.
Nearly all (94pc) of the senior executives surveyed said scrutiny and due diligence around ESG issues has increased in the past two years. 84pc of executives in Europe and 80pc of those in the US said they are willing to pay a premium for a site with very good to excellent ESG credentials.
Data centres have become a contentious topic in Ireland due to their environmental impact and the toll they may take on the country’s energy supply.
Figures released by the Central Statistics Office last month showed Irish data centres consumed more electricity than rural dwellings in 2021 as their impact on the national grid continues to rise.
“Locally in Ireland, operators are aware of the expectations from Minister Eamon Ryan that data centres will have to fit into Ireland’s climate targets,” said William Marshall, DLA Piper energy practice legal director.
“Data centres are energy intensive and the question around security of supply, availability of materials and rising energy prices are all key considerations in the decision process of where and how data centres are developed.”
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