China’s hi-tech industries are driving demand for internet data centre facilities, enticing private equity funds
- Phenomenal growth in e-commerce and hi-tech industries are fuelling demand for purpose-built facilities
- Gaw Capital Partners is starting a fund to capture demand for such facilities in mainland China
China’s stride into fifth-generation mobile telecommunications technology and the booming e-commerce sector are elevating the value of internet data centres (IDCs), making them a viable investment for alternative asset managers.
The trend is supported by the emergence of powerhouses such as Huawei Technologies and Tencent Holdings, whose growth is driving the construction of purpose-built IDC facilities to house high-powered servers, data storage systems and network support under one roof.
“The prospect of IDCs in mainland China is very bright given the phenomenal growth of e-commerce and hi-tech industries,” said David Ji, research head for Greater China at Knight Frank. “Demand for facilities like data centres, business outsourcing providers, and internet infrastructure is very strong.”
IDCs are secure, temperature-controlled facilities equipped with multiple power sources and high-bandwidth internet connections. These purpose-built facilities are used by enterprises to remotely store large amounts of data, manage business applications and host cloud computing operations.
Yet, acquisitions of onshore IDC properties by local and foreign investors have been relatively small at about US$155 million this year, according to Real Capital Analytics, after rising more than half to US$294.3 million in 2018. The pace could quicken as investors like Gaw Capital Partners make their moves.