Digital is the new infrastructure darling

Hailed as the new fourth utility by investors, digital infrastructure has been brought centre stage by the covid-19 crisis.

Internet connectivity has come under extreme stress as mass remote working has become the norm. The reliability of network infrastructure is being tested, which is pushing digital infrastructure into the spotlight.

Investors such as Brookfield are betting big on the sector. Sam Pollock, who heads the firm’s infrastructure group, told us in April that this is because Brookfield was looking for “recession-proof industries”. “I just don’t see data consumption dropping dramatically” in a recession, he said.

One senior investment professional at a blue-chip infrastructure manager told Infrastructure Investor this year that the structure of how data assets are contracted was “evolving”, making the sector more “investible”. That professional’s firm was reportedly not ready to jump into digital infrastructure investment just yet.

However, the executive said they could understand why firms like Brookfield would be placing some of their focus in that direction.

Telecoming of age

Some investors have been building on opportunities to support the reliability of this system.

GI Partners, for one, was said to be closing on its target of $1.25 billion for its debut data infrastructure fund in May, according to a person with knowledge of the firm. The fund focuses on investments in data centres, telecommunication towers and fibre wiring.

InfraVia partner Bruno Candès told Infrastructure Investor in May that telecom towers have become the “new mainstream”.

“Demand and the explosion of the portability of data is what is driving long-term growth for towers,” he said. Candès added that fibre is also growing. ‘Fibre to the home’ is bringing point-to-point fibre access to homes within communities, which allows “resilient and reliable internet connections at home to allow greater opportunities for working from home.”

Money pours into the sector 

  • June 2019
    Digital Colony closes its debut digital fund on $4 billion
  • February 2020
    Brookfield says it will allocate 15 percent of its $20 billion mega-fund to digital infrastructure
  • September
    GI Partners closes its first digital infrastructure fund on $1.8 billion

At the centre

One segment that is seeing a boom is data centre development.

Candès said there was a trend for the migration of information from premises to data centres and into the cloud. This was driving huge volumes of data and required equivalent storage capacity – also known as ‘hyperscale’. He added that the need to ensure security, reliability, resiliency and redundancy for the data centres would require significant capital expenditure.

In April, Macquarie Infrastructure and Real Assets managing director Anton Moldan told Infrastructure Investor: “Data centres play a crucial role in this digitalising economy, supporting critical storage and computing for e-commerce, banking, enterprise applications, mobile apps, on-demand video, gaming and social media.”

Ericsson projected in June that mobile data traffic per device per month in North America would more than triple from the roughly 8.5 GB/month used in 2019 to nearly 27 GB/month in 2023. Covid-19 will only firm up that trend, with the need for investment into data centres, 5G and fibre more necessary than ever.