Overview
On May 22, 2024, Partner Fritz Lark moderated a panel at Proximo Nashville 2024 that explored the key features of digital infrastructure assets that appeal to investors interested in long duration exposure and capitalizing on this market. The panelists also shared their views on investments in the digital infrastructure sector and the challenges and opportunities associated with them.
Top takeaways included:
- Electric power availability has emerged as a key factor in data center development and investment. With the anticipated growth of demand for electric power due in part to artificial intelligence and electric vehicle mandates, power constraints are becoming a limiting factor in data center development.
- With hyperscale data centers becoming a larger part of the market, the investment characteristics for this sector have continued to improve with longer term tenant contracts and more creditworthy counterparties. This provides a basis for more attractive financing, which in turn supports equity returns.
- Environmental, social and governance policies can present challenges to some investors as there are limitations on the amount of renewable power available to support new data center development. Striking the appropriate balance between “green” policies and available investments requires investors to be thoughtful in their approach, and each investor is approaching it differently.
- Investment in fiber networks can provide attractive opportunities, but exposure to shorter-term retail customer contracts and the associated sales risks presents a different consideration that is not found in many other infrastructure investments. Achieving scale and diversity of markets can help to mitigate those risks.
