CapitaLand Ascendas Real Estate Investment Trust (CLAR) fortifies its position in Europe's booming colocation market with the acquisition of a high-specification Tier III colocation facility in Watford, North-West London, for a sum of S$200 million. This acquisition bolsters CLAR’s investment in UK data centers by an impressive 54%, bringing the total to S$569.8 million. Notably, 96% of these investments are centered around London.
Managed by CapitaLand Ascendas REIT Management Limited, this latest acquisition comes from a global data center operator and brings CLAR's UK data center count to five. Mr William Tay, CEO and Executive Director of the Manager, underscores the strategic nature of this decision. He remarks, "In a world increasingly driven by digital services, London remains a premier data center locale. We're keenly focused on seizing this momentum, expanding our portfolio in a region that promises sustained growth."
Further research by CBRE indicates that the UK tops Europe's list in colocation data center capacity, with London contributing to almost 80% of this supply. The capital's robust infrastructure, marked by solid fiber connectivity across the UK and Europe, would position it as a key choice for several industries, from telecoms to cloud services.
However, with demand surging, space in Europe's primary colocation market would be thinning. CBRE predicts a decline in London's vacancy rate to 15.9% in 2023 from 16.8% in 2022. Watford's location, with its proximity to major transport links and accessibility from Central London, would offer an enticing alternative to the increasingly power-limited central city areas.
European Data Center Investments
The acquisition would underscore CLAR's commitment to strengthening its European footprint. Representing 63% of their total data center portfolio, European assets now stand at approximately S$940.6 million, with a notable concentration in the FLAPD (Frankfurt, London, Amsterdam, Paris, and Dublin) markets.
While CLAR's emphasis on European investments is evident, its broader vision encapsulates a blend of geographical diversification. Currently, their total data center asset value is S$1.5 billion, split between Europe and Singapore.
The acquired property comes with strong tenant credentials. It is occupied at an 80% rate, with occupants spanning diverse sectors like ICT, retail, and financial services. A testament to its value proposition, three tenants have been with the property for over a decade.
In financial terms, this acquisition promises to boost CLAR's Distribution per Unit (DPU) by an estimated 0.110 Singapore cents or a 0.7% uptick. The final transaction sum was £125.1 million, negotiated mutually, providing a discount to the property's independent market value. The acquisition will be funded through a blend of equity fundraising and debt financing.
