Data centre real estate remains an extremely valuable commodity if the 2020 deal figures to date are anything to go by – with the impact of Covid-19 on cloud services not expected to weaken the market.

According to the latest note from Synergy Research, data centre merger and acquisition (M&A) deals for the first four months of this year have already surpassed the 2019 total.

The primary cause for this upswing is due to ‘mega-deals’ being back in fashion: the $8.4 billion (£6.8bn) acquisition of Interxion by Digital Reality, the largest ever data centre deal, closed earlier this year, while Synergy has identified two more deals with a $1bn fee, as well as two more valued at more than $500 million.

Digital Realty and Equinix, the two largest colocation providers, remain by far the largest investors in the space, with an estimated 35% of total deal value between them since 2015.

Last year saw the highest number of data centre M&A deals, breaking 100 for the first time, yet 2017 still maintains the greatest aggregate value, the only year breaking $20bn in total. Current figures for this year are pegged at just under $75bn from 28 deals. Synergy said that 2020 would be a ‘bumper year’ for data centre M&A activity, with cloud services continuing to ramp up demand for capacity.

This is taking into account the potential effects of the Covid-19 pandemic on the market. While some industries are proferring a gloomy outlook – IDC warned last month of a serious setback for the semiconductor market for instance – demand for cloud-based software and infrastructure should not let up as a result of coronavirus.

John Dinsdale, a chief analyst at Synergy Research, said that while Covid-19 would negatively impact many IT hardware markets, software markets would struggle less, while some service markets ‘might get a bit of stimulus.’ Collaboration tools and digital entertainment have evidently seen a bump – with an increasing number of data points to prove this – while more workloads are getting pushed to public clouds as enterprises look to minimise issues which are impacting their internal operations.

“Some enterprise-oriented markets will be hit reasonably hard [while] consumer IT markets will be a mix, but there will be some positive tailwinds in various areas,” Dinsdale told CloudTech. “Service provider markets will be a mix and there will be some financial conservatism, but traffic has increased quite substantially.

“Cloud providers will actually do quite well as Covid pushes more users online and onto public clouds,” he added. “The demand for data centre capacity will continue to increase through it all, predominantly on the cloud and service provider side.”

Part of this optimism is down to the strong positions, both in terms of finance and market share, that the hyperscale cloud providers currently enjoy, Dinsdale added. “The radical shifts we are seeing in social and business behaviour will actually provide some substantive tailwinds for many of these businesses,” he said. “Hyperscale firms are much better insulated against the current crisis than most others and we expect to see ongoing robust levels of capex.”

Synergy added that it was aware of 17 more completed deals that were awaiting closure, plus more ‘potential multi-billion dollar’ deals in the pipeline.

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