Psst! Wanna buy a data center?

Data centers are being bought and sold at an increasing rate, although since they are often private transactions, solid numbers can be hard to come by.

data center / server racks / connections
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When investment bank Bear Stearns collapsed in 2008, there was nothing left of value to auction off except its data centers. JP Morgan bought the company's carcass for just $270 million, but the only thing of value was Bear's NYC headquarters and two data centers.

Since then there have been numerous sales of data centers under better conditions. There are even websites (, Five 9s Digital) that list data centers for sale. You can buy an empty building, but in most cases, you get the equipment, too.

There are several reasons why, the most common being companies want to get out of owning a data center. It's an expensive capex and opex investment, and if the cloud is a good alternative, then that's where they go.

But there are other reasons, too, said Jon Lin, president of the Equinix Americas office. He said enterprises have overbuilt because of their initial long-term forecasts fell short, partially driven by increased use of cloud. He also said there is an increase in the amount of private equity and real estate investors interested in diversifying into data centers.

But that doesn't mean Equinix takes every data center they are offered. He cited three reasons why Equinix would pass on an offer:

1) It is difficult to repurpose an enterprise data center designed around a very tailored customer into a general purpose, multi-tenant data center without significant investment in order to tailor it to the company's satisfaction.

2) Most of these sites were not built to Equinix standards, diminishing their value.

3) Enterprise data centers are usually located where the company HQ is for convenience, and not near the interconnection points or infrastructure locations Equinix would prefer for fiber and power.

Just how much buying and selling is going on is hard to tell. Most of these firms are privately held and thus no disclosure is required. Kelly Morgan, research vice president with 451 Research who tracks the data center market, put the dollar figure for data center sales in 2019 so far at $5.4 billion. That's way down from $19.5 billion just two years ago.

She says that back then there were very big deals, like when Verizon sold its data centers to Equinix in 2017 for $3.6 billion while AT&T sold its data centers to Brookfield Infrastructure Partners, which buys and managed infrastructure assets, for $1.1 billion.

These days, she says, the main buyers are big real estate-oriented pension funds that have a different perspective on why they buy vs. traditional real estate investors. Pension funds like the steady income, even in a recession. Private equity firms were buying data centers to buy up the assets, group them, then sell them and make a double-digit return, she said.

Enterprises do look to sell their data centers, but it's a more challenging process. She echoes what Lin said about the problem with specialty data centers. "They tend to be expensive and often in not great locations for multi-tenant situations. They are often at company headquarters or the town where the company is headquartered. So they are hard to sell," she said.

Enterprises want to sell their data center to get out of data center ownership, since they are often older -- the average age of corporate data centers is from 10 years to 25 years old – for the obvious reasons. "When we ask enterprises why they are selling or closing their data centers, they say they are consolidating multiple data centers into one, plus moving half their stuff to the cloud," said Morgan.

There is still a good chunk of companies who build or acquire data centers, either because they are consolidating or just getting rid of older facilities. Some add space because they are moving to a new geography. However, Morgan said they almost never buy. "They lease one from someone else. Enterprise data centers for sale are not bought by other enterprises, they are bought by service providers who will lease it. Enterprises build a new one," she said.


Copyright © 2019 IDG Communications, Inc.

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