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Technology On-Demand: Why Zuckerberg & Tech Leaders Are Investing in Datacenters

Post on: November 29, 2016 | Corey Welp | 0


The following is a guest post written by Corey Welp, Co-Founder and Managing Partner of 1547a leading developer and operator of custom-designed datacenters.

Have you watched a video on your cell phone, caught up on the latest Netflix series or sent a work email on your tablet? If the answer is yes, then you are contributing to the increasing growth in datacenters.

Datacenters, facilities that store and manage critical information and data, are experiencing growing demand from cloud-based services, video streaming, and data-heavy applications. Each of these drivers rely heavily on datacenters to house their information. There is no sign of this demand slowing down and today, growth in datacenters is attracting Tech leaders, including Mark Zuckerberg, as a new investment opportunity.

Tech leaders are looking to the datacenter market as an investment, not only because they are utilizing these facilities on a large scale, but also because they may be a reliable investment venture. Iconiq Capital, a wealth management firm with a high-profile, Silicon Valley client roster which includes the CEO’s from Facebook, Mark Zuckerberg, LinkedIn, Reid Hoffman, and Twitter, Jack Dorsey, is pooling client money into private funds that intend to go after opportunities to invest into datacenter properties. The increasing demand for connectivity and storage capacity at this asset type is fueling this sector and Iconiq plans to capitalize on this trend.

As of November 2016, publicly traded US datacenter Real Estate Investment Trust (REIT) share prices are up 15.6% on average year-to-date, outperforming the S&P 500, NASDAQ 100, and DOW 30, whose indices are up 2.34%, 1.64%, and 2.75%, respectively.

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Datacenters, typically, have steady income streams through long-term leases and contractual rental rate increases. Additionally, they encompass two major investment groups: real estate and technology. Both of these investment groups have had attractive performance in the past and the datacenter market combines elements of each that are favorable to investors. 

The cloud landscape is a major contributor to long-term growth in the datacenter space. Statista, a leading statistical research company, reports that spending in 2016 on public cloud infrastructure as a service hardware and software is forecasted to reach $38 billion and will grow to $173 billion in 2026. Morgan Stanley predicts Microsoft’s cloud products will account for 30% of their revenue by 2018. These numbers are clear indicators of how cloud computing is impacting datacenters.

The Internet of Things and data storage also rely on datacenter development to expand. Everything from household appliances to self-driving cars will continue to drive the exponential growth of data traffic and storage that data centers facilitate. Cisco reports that data stored globally in datacenters will quintuple by 2020 to reach 915 exabytes, and that cloud datacenter traffic will increase 262% from 2015 to 2020, with 92% of all workloads being processed in the cloud by 2020. In a world that is always “connected,” where information on-demand is the norm—datacenters are the infrastructure making this possible. Datacenters have caught the attention of savvy Tech Leaders and more investors are likely to follow.


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Disclaimer: WealthForge provides this information to our clients and other friends for educational purposes only. It should not be construed or relied upon as legal advice. Private securities offerings may have a long holding period, be illiquid, and contain a high degree of risk. Investors must be able to afford the loss of all of their principal. Projected returns may significantly differ from actual results. Past performance does not indicate future results. Potential investors should consult with a knowledgeable tax advisor prior making an investment.

Disclaimer: Altigo provides this information for educational purposes only. It should not be construed or relied upon as legal or tax advice.

About author

Corey Welp

Corey Welp is Co-Founder and Managing Partner of 1547. His responsibilities include investor relations, raising capital, and financial evaluation of all new opportunities. He has led the company in three large scale property transactions totaling over 500,000 SF of datacenter space under development.
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