Citing rising demand by investors and users, JLL Valuation Advisory has formed a new data center practice for clients seeking alternate real estate assets.
Senior Vice President Stuart Miller has been promoted to lead the new practice, which will be responsible for valuations for secured lending advisory, portfolio valuation, financial reporting and purchase price allocations.
Based in Dallas, Miller has more than five years of experience in valuation and consulting on data centers and has worked with multiple Fortune 100 technology companies, investors, national banks, lenders and owner-operators. He is building and training the data center team to continue growing the sector. The team is currently working with more than 30 national portfolios on behalf of a variety of clients, including international REITs and hyperscale providers.
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Miller said in a prepared statement many JLL clients touch the data center sector and the new team will enable JLL to better support those client needs. He said JLL has seen increasing requests in recent years for valuations and advisory services in the data center sector. Miller said those requests included enterprise owner-operators looking at dispositions as they migrate to collocation or cloud-based operations as well as investors who were new to the data center market seeking intelligence on potential new deals and collocation operators opening businesses in new markets.
Growing sector
The team is part of JLL’s broader data center and real estate business, providing appraisals and acting as risk assessors who also offer market intelligence for an alternative real estate class that is rapidly gaining investor interest.
Tony Lenamon, Americas head of valuation advisory, said in prepared remarks alternative real estate classes like data centers have been the darlings of commercial real estate for the last few years. Lenamon said user and investor demand propelled the sector to new heights in 2021.
JLL’s 2021 Year-End Data Center Outlook report said merger and acquisition activity in the sector in 2021 hit a new record, following an earlier record set the previous year. The report states there was $47 billion in M&A activity reported in 2021, up from the previous record of $34.5 billion in 2020. Among the major deals announced in 2021 was KKR and Global Infrastructure Partners acquiring CyrusOne for $15 billion, a transaction that closed in the first quarter of this year.
Other mega-deals in 2021 cited by the JLL report were Blackstone’s acquisition of QTS Realty for $10 billion and American Tower Corp.’s purchase of CoreSite for $10 billion. Those deals and others enable large players to scale rapidly both in the U.S. and abroad.
JLL research also stated the global construction pipeline reached a new record in 2021, primarily boosted by robust activity in the U.S. The national construction pipeline grew by 18.9 percent year-over-year in 2021, when it reached 727 MW installed. The year-end report noted demand hit a record in 2021, with the U.S. absorbing a total of 885.7 MW across 14 markets. Core markets in Europe surpassed earlier projections with absorption of 219.3 MW, a 9 percent increase year-over-year.
Large data center deals have also been occurring this year. In April, Macquarie Asset Management and NTT, the Japanese IT infrastructure and services company, agreed to form a strategic real estate partnership covering NTT’s wholesale facilities in Europe and North America. While financial details were not disclosed, NTT is one of the world’s largest data center operators, with more than 1,300 MW capacity and a 25 percent increase in capacity planned in its development pipeline.
In January, a joint venture of American Real Estate Partners and Harrison Street announced it would spend up to $1 billion to develop up to 2.1 million square feet of new data center space in Northern Virginia in Loudon County’s Data Center Alley. The joint venture is planning campuses for hyperscale customers that would offer 400 MW of capacity at full build-out at sites in Ashburn and Arcola in Northern Virginia.
