Investors are increasingly drawn to datacenters, primarily because of customer retention benefits. ‘At contract expiration, customers often remain at their current datacenter,’ noted an asset firm leader. The burgeoning AI landscape is attracting investors eager to capitalize on rising demand, with datacenter service users forming a seemingly captive market.

During the Datacloud Global Congress in Cannes, France, speakers discussed ‘creative’ funding strategies to secure capital for new facilities. Natalia Akst from Macquarie Asset Management highlighted the sector’s high entry barriers, stressing the effort and investment required to develop a datacenter, making it a challenging field to break into.

Macquarie, a longstanding market player, acquired a significant stake in European provider VIRTUS. With datacenter demand skyrocketing due to AI fever, commercial real estate firm CBRE reported peak interest in many regions.

Akst elaborated, saying that infrastructure must deliver mission-critical services and maintain stable cash flow, ideally through long-term contracts or regulation, and stressed low competition levels due to high entry barriers. She emphasized the extensive capital and effort needed to establish a datacenter, noting it’s not something just anyone can undertake.

Even with challenges like land shortages, investors remain undeterred. Some, however, worry about a potential investment bubble, reminiscent of speculative ventures without secured clients. High-profile investments include a £10 billion commitment by Blackstone to a massive AI facility in northeast England.

Despite early warning signs from voices like Fabrice Coquio of Digital Realty, and Alibaba’s Joe Tsai, about exaggerated investor fervor surpassing actual demand, the allure of datacenters remains strong. These facilities promise steady returns, making it an appealing asset class, largely due to customer loyalty and significant operational hurdles for competitors.