The COVID-19 pandemic has both highlighted and accelerated the development of digital transformation. People are now adopting post-pandemic strategies such as successfully working from home, students taking classes remotely, consumers purchasing groceries online, and people maintaining social contact through social media and virtual calls. Improving digital strategy to ensure the economy’s competitiveness is one of the critical factors that help industries survive in these challenging times.
It is becoming clear that digital infrastructure such as data centers, fiber optic cable, cell sites, and macro towers are now more significant and regarded as the fourth utility (in addition to water, gas, and electricity). These enable connectivity and thus serve as the foundation for both digital transformation and the digital economy.
It is also the perfect time for real estate investors to consider investing in digital infrastructure, as it will provide numerous opportunities in the future. Real estate developers can help ensure fast and reliable connectivity for their communities and support digital economies by creating appropriate zones for digital assets and collaborating with digital companies on infrastructure development.
Here are some of the reasons why digital infrastructure is a good investment for real estate investors:
1. Digital Infrastructure is Fundamental to the Society
The pandemic has highlighted the value of digital infrastructure assets such as mobile phone masts and data centers. Furthermore, the crisis has accelerated its development. People could work and study from home, do their grocery shopping online, and communicate with friends, families, and colleagues via online video platforms.
As the digital transformation accelerates in the coming years, digital infrastructure will become even more vital for the effective functioning of businesses and society. This provides even more reason for real estate investors to begin including digital infrastructure in their planning and, if possible, investing in it.
2. Digital Infrastructure Is Key to Digital Transformation
Digital initiatives and technologies are becoming more prominent in all sectors. As a result, the demand for high-performance digital infrastructure is increasing.
With the improved digital infrastructure, the real estate industry will accelerate digital transformation and keep up with other digitally transforming industries such as manufacturing, healthcare, and finance.
Through enhanced connectivity, digital transformation can open up more opportunities for real estate investors locally and globally. The opportunities of investing in digital infrastructure are numerous – it includes cost savings and process improvements, enabling better efficiency, quicker turnaround times, and the potential to gain other competitive advantages by having an efficient and flexible technology environment.
3. Global investment opportunities exist in Digital Infrastructure
Almost every country now has a distinct digital strategy due to two primary factors: first, to ensure the country’s ability to compete in the global economy, and second, to ensure citizens have access to connectivity to improve their lives and close the “digital divide.”
Perhaps it is not surprising that the three largest trade areas have the most ambitious digital infrastructure policies: the United States, the European Union, and China.
In the United States, President Biden’s $2 trillion infrastructure spending plan includes $2.8 billion for digital infrastructure spending. The EU intends to spend $200 billion over the next ten years through its Digital EU program. Meanwhile, China plans to spend the most on digital infrastructure with the most ambitious global policy, with $1.4 trillion allocated from a $2.1 trillion total spending plan.
The digital revolution has created substantial investment opportunities for investors all over the world.
4. The demand for Digital Infrastructure will increase exponentially
Structural trends are driving the strong growth in demand for digital infrastructure. The use of connected devices such as smartphones is expected to grow further. Blended learning, which combines face-to-face interaction with virtual classes, is expected to be a part of post-pandemic life, while e-Commerce is expected to grow even more rapidly in the coming years. The widespread use of the internet is increasing exponentially, with more and more people using it for work, school, entertainment, business, and so on.
By 2025, the Internet of Things (IoT) will connect 38.6 billion devices, up from 22 billion in 2018. Globally, devices will consume 74 zettabytes of data by the end of 2021 and 149 zettabytes by 2024. This equates to a more than 50% increase in only three years or a 3,600% increase between 2010 and 2021 and a 7,350% increase between 2010 and 2024.
Digital infrastructure such as data centers and cell towers is a promising solution for investors looking for growth opportunities that serve as a fixed-income alternative. As people shift from shopping and working in public places to doing so in their own homes, the demand for digital infrastructure will continue to increase.
5. Digital Infrastructure is also driving improvements in energy efficiency
With the responsible use of natural resources and decarbonization, digital infrastructure is also helping to drive improvements in energy efficiency.
According to a report from Science.org, global data center electricity demand in 2019 was approximately 200 TWh, or about 0.8% of global final electricity demand. If current hardware and data center infrastructure efficiency trends continue, international data center energy demand could remain nearly flat through 2022, despite a 60% increase in service demand.
Furthermore, artificial intelligence is now being used to maximize energy consumption efficiency. The advances in energy efficiency will keep pace with increases in demand and data use, resulting in stable energy consumption.
Aviso Valuation and Advisory Corp. is a real estate consultancy firm that offers valuation and business advisory services compliant to international standards such as the International Valuation Standards (IVS) and International Financial Reporting Standards (IFRS). To assure that we only produce high-quality deliverables, as needed, we do tasks beyond the usual appraisal process like verifying pertinent property documents (i.e. land titles, tax declarations, etc.) with the appropriate government agencies for due diligence purposes prior to the acquisition of the properties.
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https://www.science.org/doi/10.1126/science.aba3758
https://www.iea.org/reports/data-centres-and-data-transmission-networks
