While the long-term need for data centres appears certain, the investment case is less straightforward. For this relatively young sector, questions around liquidity, technological change and returns remain unresolved, prompting investors to look beyond the hype before committing to capital, writes Elise Machanych.
History suggests transformative technologies, such as the railway boom of the 19th century to the fibre-optic buildout during the dot-com era, often attract significant waves of investment before markets fully understand which projects will ultimately create lasting value.
“As with other infrastructure booms and bubbles, there is a lot of building. Many buildings will be a success, and some will fail. The typical outcome in failing projects is either the costs become too high — underestimated during underwriting — or the demand too low — overestimated during underwriting,” explains Jose Pellicer, a partner and head of strategy at Evonite.
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