Vantage Raises $9.2B for Data Center Investments

This week, Vantage Data Centers completed a $9.2 billion equity raise to fund its growth across North America and EMEA, accelerating and extending the company’s strategic capabilities to partner with global hyperscalers in meeting unprecedented cloud and AI demand.

Silver Lake and global alternative asset manager DigitalBridge Group managed the investment vehicles.

The raise was significantly oversubscribed and upsized by $2.8 billion with participation from multiple global investors.

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Aggregate new investment in Vantage over the past nine months totals approximately $11 billion, of which more than $7 billion is primary equity. That includes a €1.5 billion ($1.6 billion) investment by Australian Super in September 2023.

Primary proceeds will be used to fund Vantage’s growth across North America and EMEA, accelerating and extending the company’s strategic capabilities to partner with global hyperscalers in meeting unprecedented cloud and AI demand.

Vantage owns or controls more than 25 sites in North America and Europe, the Middle East and Africa, totaling over 3 gigawatts of expected capacity. The company anticipates that the new funding will drive an estimated $30 billion of additional development.

Demand outpacing supply

Carl Beardsley, senior managing director and JLL Capital Market’s Data Center leader, told Commercial Property Executive the data center sector continues to attract large equity commitments.

“Demand is far outpacing supply, vacancy is at an all-time low, and lead times to obtain scalable power at these sites is a challenge,” Beardsley said.

“Data center developers often like to acquire and build multi-building campuses which were historically built over time but with the growth in the sector, we are experiencing pre-commitments from end users on full campuses. This has pushed forward the development cycle of data center campuses and the need for more equity at a quicker pace.”

Howard Berry, principal, National Data Center Solutions with Avison Young, told CPE that investors are showing a strong interest in data centers due to record-low vacancy rates of 2 percent in North America and a projected tripling of the current 14 GW capacity to 60 GW over the next five years.

“This growth is driven by the increasing demand for AI and large language models,” Berry said. “As an example, a typical AI data center tenant will spend over $50 million on GPU chips for every 1 MW of deployment, and there is 1,000 MWs in a GW. As digital transformation continues, the need for robust and scalable data storage and processing solutions will likely sustain investor interest in the sector for the foreseeable future.”

CommercialEdge’s Doug Ressler confirms the interest investors are seeing in data centers, which can provide stable rental income due to long-term leases with tenants.

As AI data center demand grows, property values may appreciate over time, and investing in data centers diversifies a real estate portfolio beyond traditional asset classes.

As a real estate investment, data centers offer tax benefits, including depreciation deductions.

AI’s ‘just in its infancy’

Robert Martinek, director at EisnerAmper, told CPE that most market participants believe that AI is in its infancy and global data center electricity demand could double over the next four to five years.

“Data center demand from investors commenced with the emergence of Bitcoin mining,” Martinek said. “Lately, demand has been directly fueled by the increase in artificial intelligence. Since AI requires massive energy consumption, data centers have seen significant increases in occupancy and rental rates during the past 12 to 15 months.”

The demand in the U.S. economy for services such as AI and cloud computing is high and is expected to continue for decades, Johnathan Meade, chief operating officer at Meade Engineering, told CPE.

“Data centers provide the necessary infrastructure to support the next wave of the technological revolution,” he said.