Pimco, Europe's data centre fund approaches 2 billion

"A lack of supply compared to cloud and AI penetration in our economies and a push - also due to rising geopolitical tensions - for digital 'sovereignty' and the storage of sensitive data within national and European borders. Data centres have gone from niche investments to increasingly central assets,' explains Kirill Zavodov, managing director at Pimco and portfolio manager heading the European real estate team. It is no coincidence that the Pimco European Data Centre Opportunity Fund - whose fundraising began in August 2023 with initial capital provided by Pimco and Allianz Group, with a target of EUR 750m - closed subscriptions in October for a total of EUR 1.8bn, exceeding its initial target by 2.4 times. The fund, which has a duration of 10 years, is the largest, at EU level, dedicated only to data centres and, among its investors, would also have the Canadian pension fund La Caisse, but also, among others, the EIF (the European Investment Fund, which in May announced an initial investment of €150 million), and Cdp Equity, which has allocated a further €50 million as part of a joint initiative with the EIF. Today,' continues Zavodov, 'in terms of installed capacity per capita, in Europe we are five years behind the US and historically 70% of European figures are held in the US'.

"The data centre market has different characteristics if the facility is designed for cloud or AI. In the first case, facilities closer to urban centres and with low vacancy are needed. In the second case, the main locations are more remote areas where energy is cheaper. In Europe, three quarters of the demand comes from data centres for the cloud and one quarter for those for AI. It used to be that the developer built the facility and managed it completely, and the tenant merely took over and acquired capacity. Now, the tenant comes to occupy the entire building or an entire data centre campus. Therefore, it is necessary to be able to work constructively with hyperscalers throughout the entire journey, from due diligence to site acquisition, through design, pre-construction and finally to the development phase of the facility to ensure that it is best suited to their needs. Ultimately, the task of developers today is not just to build a data centre and sell the product, but to be able to solve their problem of large-scale capacity deployment across Europe. To do this, they need high technical skills on the development of critical infrastructure for large technology companies, presence on the ground and in key markets, and access to capital'.

Returning to the fund, how many resources could be allocated to projects and developments in Italy? "We are not talking about individual investments," Zavodov points out, "but I can say that we are seeing greater demand in the so-called Tier-2 and 3 markets, such as Madrid, Milan, Zurich, and Berlin, which historically have always had less installed data centre capacity than Tier- 1 markets such as Frankfurt, London, Paris, and Amsterdam. The large area of Milan, Lombardy, Northern Italy has the characteristics to attract additional investors".
"However, what are investors looking for? "Many investors," Zavodov concluded, "are looking to increase exposure to AI in general, because it will play an important role in their portfolios in the coming years. Investing in data centres allows them to do so on a very low-risk asset. Investors are also apparently attracted by the fact that the sector is developing critical infrastructure, with long-term leases to some of the most capitalised technology companies in the world'.