Buyouts and mergers fuel data center boom
Investors are hunting for data center deals amid supply crunch in Asia-Pacific
A frenzy of mergers and acquisitions is sweeping the Asia-Pacific data center market, driven by strong demand and limited availability.
Recent high-profile deals include Blackstone’s AU$24 billion ($16 billion) acquisition of Australian data center platform AirTrunk — the largest-ever data center company deal — and DigitalBridge’s acquisition of Yondr Group, a global developer and operator of hyperscale data centers.
While M&A activity dominates the headlines, asset-level deals are also on the rise. In the third quarter of 2024, investment in APAC data centers surged 114% year-on-year to $2.8 billion, according to JLL’s Capital Tracker.
A prime example was the KRW 734 billion sale of Hanam Data Center by IGIS Asset Management, which marked the first-ever sale of a stabilized data center, or a fully pre-committed and operational data center, in South Korea.
“Asset-level trades like this are rarer as data center operators typically prefer to own and develop their own data centers,” says Bob Tan, Executive Director, Capital Markets Transactions, JLL. "However, in markets like Japan and Korea, enterprising investors have been quite successful in securing the land, power, and end-users, making asset-level deals more common at this moment."
The underlying factor driving increased deal activity, whether it’s individual asset deals or large-scale M&A, is the robust demand from consumers, cloud service providers, and artificial intelligence, Tan says.
Limited asset availability, coupled with favorable market conditions, has also contributed to the surge in activity.
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A new phase of growth
The flurry of deals comes at an inflection point when data centers in the region are reaching operational status.
“We’re nearing the tail end of a wave of land acquisition and construction,” says Tan. “Operators and investors will soon need to decide on the optimal strategy to maximize the value of their new assets, which could lead to more M&A or joint ventures.”
The robust fundamentals of the APAC market make it a prime investment destination. While still relatively nascent compared to more mature data center markets, the region is experiencing rapid growth.
In Southeast Asia, for instance, the sizable domestic markets, rising mobile penetration, and the soaring demand for cloud services are creating unprecedented demand for data centers.
“The APAC data center market is still considerably underdeveloped and underserved compared to the Americas and Europe,” says Celina Chua, Data Center Client Solutions Director, Capital Markets, Asia Pacific, JLL. “The implementation of data localization laws in some markets is also accelerating the development of local data centers.”
In more established markets like Japan and Australia, government-led digital transformation initiatives are further driving demand.
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More deals on the horizon
The future of data centers looks bright as operators continue to expand to meet demand and investors capitalize on the growth potential.
Deal activity is expected to be driven by M&A at the company level, according to Tan.
“Most operators have invested heavily in building their platforms to where they are today,” he says. “They would prefer not to divest individual assets as it would undermine their overall enterprise value.”
Chua echoes this sentiment, anticipating more joint ventures and M&A in the coming years, especially with limited assets available on the market.
“Operators with strong management teams but limited resources and traction will become prime targets for larger platforms for consolidation or acquisition,” she says.
Contatta Bob Tan
Executive Director, Capital Markets Transactions, JLLWhat’s your investment ambition?
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