by Emmanuel Becker, Managing Director Italy, Equinix
I was recently invited to contribute to a panel discussion organised by law firm BonelliErede and researchers Inspiratia, at the stunning Italian Embassy in London. The title was ‘investing in non-core infrastructure’. Now, you may already be asking yourself ‘what on earth is non-core infrastructure (and why should I care?)’.
The fact is that the underwhelming title (for non-institutional investors, at least), belies an incredible transformation. Investors are looking beyond their traditional investment choices, and this presents a chance for the critical role of digital infrastructure in modern economies to be much better understood.
It is also becoming clear that Italy is a strong market where the potential of new investment opportunities can be identified and realised, and that Milan has as much potential as any of the other major European capitals to be a centre of the global information economy.
Investors turning to new assets in a diversified world
Up to now, real estate investment has generally pursued a narrow set of core sectors. But the relatively conservative world of institutional investors has woken up to the new opportunities that come with a changing world. Anything out of their previous comfort zone is labelled ‘non-core’.
That’s about as close as a precise definition comes, but the team at Inspiratia have helpfully identified six investment targets: hospitals and healthcare, nursing services, data centres, funeral services and crematoria, car parks and education.
These six non-core sectors are transforming into institutional investment opportunities for three reasons.
Firstly, opportunity-driven non-core infrastructure is experiencing changes to regulation which has led to a shift in the way these sectors are assessed by investors.
Secondly, technological developments have driven some sectors to be viewed as relevant to non-core investment. Finally, the financial landscape facing long-term investors has turned these trends into viable investment opportunities.
Crematoria and data centres – really?
It’s the technological developments that I find most compelling. You may wonder why data centres are lumped in with car parks and crematoria, but both are high potential and growing markets.
Data centres are becoming a big draw as the technology within these buildings, and the data they contain, becomes increasingly attractive to investors.
“Data is the new oil, and data centres are becoming a key element in this new environment,” said Mario Roli, Partner and Leader of Energy & Infrastructure Focus Team at BonelliErede.
“Italy enjoys a strategic position, in the heart of the Mediterranean Sea, and is one of the major producers of green electricity in Europe, a key element for the development of the data centre sector”, he added.
Thanks to our increasing reliance on technology, the need for more data centres in Italy and globally looks set to grow and grow. Put that way, it is almost surprising that there’s not more investment in the sector already.
Investors are being more responsive to change
Non-core infrastructure has low barriers to entry (and offers high return on investment). That flexibility and ease dovetails well with a new investment landscape.
Flexibility means that investors can respond to the transformative impact of digital health, and track that transportation systems are digitising and integrating, and plan that smart city mobility will generate new investment opportunities, and make quick decisions accordingly.
They know that with an ageing population, funeral services will be in greater demand, and they know that car parks – profitable today – may be even more profitable as car ownership declines and autonomous vehicle adoption means that car parks become attractive as residential or commercial property centres.
Investing in data centres
The great opportunity with data centres is that you are effectively investing in multiple sectors as all sorts of customers are housed in data centres – automotive, healthcare and manufacturing to name a few.
This offers a less risky strategy for investors. Furthermore, businesses are realising they need to be global to succeed – and demand is rising for a supporting, global infrastructure.
Data centres are the right infrastructure for investors as they are springing up everywhere to keep up with this demand.
As they scale, companies like Equinix benefit from having a unique knowledge of data trends emerging across businesses.
And data centres in key strategic locations, such as Milan, where the data stream from the Middle East and the Asia Pacific region flows through North Africa, Sicily and the Italian Peninsula, are particularly critical to the emerging digital economy.
Tracking the trends
Last year, Equinix launched a new annual report – the Global Interconnection Index – which harnesses our insights and provides businesses with the knowledge they need to achieve digital business success.
According to the Index, thanks to the growth of trends such as the IoT, urbanisation and global trade of digitally deliverable services, through 2020, the Interconnection bandwidth for the banking and insurance sector is to grow by 58%, the energy and utility industry by 65%, the manufacturing sector by 54% and the healthcare and life sciences sector by 67%.
Access to such data allows businesses to forecast infrastructure trends. Yet another reason to bank on the increased value of data centres.
Investment in Italy
Equinix is part of enabling global digital growth through the provision of Interconnection – allowing companies to directly connect with supporting partners, and customers, around the world. Italy is valued as a major global market, which is shown in Equinix’s own investment decisions.
As I said at the event: “As consumers, we need to be more connected to our provider, to other users and to our global systems, so we need our data centres to be nearby to have the best access to our data. This is becoming a global phenomenon because consumers won’t wait. As such, we’re investing in Italy, not just on a regional level but on a city-by-city basis.”
We understand the criticality of solving the challenges of proximity and global coverage – and investors are waking up to the business case behind that too. Digital infrastructure’s time for recognition has come.
Source: Data Economy