Key takeaways from the Tech Capital IIFF in London 13th May 2025
Risks continue to arise from a variety of factors – from the pace of technical change to the scale of projects, from geopolitics to supply chain pressures:
Financing
In terms of digital infrastructure capital the volatility in the DC market represents a change from last year when there was unbridled optimism regarding finance. It’s become much more apparent it’s hard to build DCs, to find power etc and therefore make a return. Therefore, more realism, alongside optimism, has entered the market and the conversations around exit strategies and the potential need, eventually, for IPOs to allow for exists have begun.
Design
The even present request from clients for flexibility in data centre design remains, and is increasing, to attempt to keep pace with the rapid pace of chip and rack technology changes and avoid obsolescence before operation even begins. This raises interesting questions regarding the longevity of traditional construction and the shift towards modular for speed of deployment, flexibility and potential beneficial impacts to TCO and asset longevity.
Delivery
The uncertainty around delivery come from multiple risks including geographies, geopolitics (which is the top risk for customers), reliable GCs and operators and cost of funding. With the huge increase in the scale of projects, the risks are getting bigger. Clearly, if you have a delay in a billion dollar project the interest charges will be much higher than for a million dollar project.
These represent an increasing challenge for DC customers who want both certainty and realistic time frames. So if you’re running a billion dollar project how do you manage these risks? Risk mitigation strategies are a big focus for the market with the following being highlighted:
Stakeholder management
There was a recognition that needs to be total engagement with all stakeholders with everybody from your neighbours to state and federal government. The concept of social license to operate will definitely form part of the decision-making process about which DC will be built; with DC’s becoming part of the energy solution with the increase of microgrids. Helping to reframe DC’s as part of the solution, not the problem.
Understanding the market
Developers need to know where the demand is coming from or in their rush to get something built they can build the wrong thing and be left with stranded assets when the market pivots leaving them burnt. Customer diversification and understanding the customers need and preferences will be key, alongside understanding which IT architecture (i.e. cloud, AI (model/inference/generative), enterprise) are happy “living” together.
Supply chain
There continues to be a huge demand on the supply chain, and this is set to increase. Supply chain resilience continued to be a theme with funders accepting that as the project supersize, so does the cost of LLE and that taking that inventory onto the balance sheet is necessary (despite the interface risk this brings in the construction phase).
Diversification
Increasing diversification of geographies (which may become increasingly importance as the importance of data sovereignty rises), tenants and currencies.
Partnerships
We might see developers increasingly using JVs to help to de-risk projects, for example with local energy utilities or with the customer.
Power supply
There is still no silver bullet to deal with current “power gap” (no new power available for circa 5-8 years in certain markets) and while solutions for the future are fast evolving (nuclear, gas, renewables) the “now” is still a huge problem. Funders are looking for project which have certainty of power within 12 months; could this be the unicorn that slows the pace of funding?
We hosted a round table discussion, more can be read on that conversation here. Accounting for Reality: Unlocking Hidden Value from Maximising Climate Resilience in Data Centres – Arch Law
A great event and we’re keen to continue the conversation, please do reach out and let us know your take!
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