Brookfields gains Cyxtera for retail colocation data centre

Brookfield will also buy real estate at several Cyxtera data centres to have total ownership at a value of approximately US$1.3bn
Brookfields is to acquire colocation company Cyxtera, sparking global interest in how retail colocation data centres could change the industry landscape

Brookfield Infrastructure Partners is set to acquire Cyxtera, a colocation company that previously filed for Chapter 11 bankruptcy, for US$775m. 

The deal will combine Cyxtera with Brookfield's other US provider, Evoque, and create a retail colocation data centre provider with over 330MW of capacity. Brookfield will also buy real estate at several Cyxtera data centres to have total ownership at a value of approximately US$1.3bn.

The transaction with both companies is subject to regulatory approval and is expected to close in early 2024. Cyxtera's Chapter 11 plan hearing is scheduled for November 16th 2023.

The rise of the retail colocation data centre?

Brookfield will also purchase the real estate at seven of Cyxtera’s US data centres from several landlords. Cyxtera has said that these transactions will increase existing facility ownership, secure expansion opportunities and ultimately offer the company more control concerning cost.

The company has also agreed to sell its interest in its Montreal and Vancouver data centres to Cologix, a network neutral interconnection and data centre company.

In its Q3 2023 earnings report, Brookfield Infrastructure Partners said it hopes to “generate strategic value” by combining Cyxtera with Evoque to create a retail colocation data centre provider with more than 330MW of capacity in high-demand areas across North America.

“The combined platform will have the scale, assets, and capabilities required to provide critical infrastructure for its over 2,500 customers to support the exponential increase in demand from industry tailwinds, including AI and cloud deployments,” Brookfield says.

The data centre colocation market is only expected to rise, with the US market alone estimated to grow with a CAGR of 6.70% from 2022 to 2028. 

Data centres in other nations around the world have already started to expand upon their colocation services, given the demand and rise in AI and 5G demand. In particular, Japan is capitalising on its data centre colocation services growth given its strong position as a sustainable country and its increased adoption of cloud computing services.

Notably, the country has more than 100 operational colocation data centres (as of August 2023), with most of its colocation facilities being developed according to Tier III standards.

This rise in colocation data centres is being partly attributed to the rise in coverage of 5G and other emerging technologies. Given a rise in AI and usage and cloud migration over the past year alone, it will be no surprise that digital transformations such as these will ultimately lead to more global data centre investments.

It is clear that businesses must continue to educate themselves on these types of investments in order to succeed.

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