Advice and Opinion

Data centres highlight industrial property’s resilience

Amazon Web Services’, Brackengate 2 in Cape Town.
Amazon Web Services’, Brackengate 2 in Cape Town.

As our daily lives shift towards online, data centres are fast becoming a key asset for service providers. The demand for data centre space continues to grow in alignment with technology which affects every aspect of modern life and business. Redefine Properties says that accelerating trends like e-commerce and data centres are adding resiliency to industrial property against the backdrop of Covid-19.

Johann Nell, National Asset Manager of Industrial at Redefine Properties says that while online sales (R14 billion, 2018) still constitute a fraction of what South Africans spend in malls, online shopping has shown exponential growth and this has had a direct impact on real estate demand.

The promise of same day delivery / overnight shipping, a benchmark in fulfilment, requires massive warehouses to be situated close to the communities and in many cases are larger than traditional warehouse” he says.

The trend that has equally excited is the growth in demand for data centres. According to Nell, this is driven by key changes like remote working, the rise in e-commerce and, on-demand streaming services mostly triggered by the pandemic. “Like e-commerce, the big data phenomenon is not new yet, it wasn’t until the pandemic that it started to manifest itself in the real estate sector.”

Two of Amazon Web Services’ (AWS) three availability zones in Cape Town are situated at Redefine’s Brackengate 2 and a new one is located at the R3.5 billion Atlantic Hills Business Park. The Atlantic Hills precinct is situated on the Potsdam Interchange, aligned with the M12 extension with immediate access onto the N7. The 45-hectare park has rights for industrial and commercial uses, offering prospective tenants and investors space ranging between 600 square meters to 40 000 square meters.

The industrial property sector stands to benefit from the huge growth in data consumption as well as Internet of Things,” adds Nell. 

Redefine believes the remote working trend is going to be triggered more widely across other industries and this will drive the need for strong data centre capacity. The roll out of 5G networks is another positive development that is set to promote growth in the data centre market. The promise of artificial intelligence can only be actualised when data centres can store, process, and analyse data efficiently. These innovations bode well for industrial property and distributed data centres.

Servers use tremendous amounts of electricity and generate a lot of heat, which in turn requires extensive investments in cooling systems.  

In the current scenario, power is of genuine concern, however at our properties we are getting around it through better use of power and using it more efficiently. We are able to generate our own power through Tri-Gen methods that includes gas and solar as energy sources, thereby supplementing constrained grid access in certain nodes,” adds Nell.   

 “Like e-commerce before the data revolution, South Africa is still very much in infancy and a lot of work still needs to be done for DCs to emerge as an asset class. Long term prospects depend on long tenure, security of demand and new age thinking. Deal structures will certainly involve a need for tailor made solutions that benefit all.”  

Whether an economy is driven by manufacturing or information, the age-old fundamentals of real estate still apply, location, location, location.