The Data Demand Surge
Global internet traffic has grown at a compound annual rate exceeding 25% over the past decade, and the proliferation of AI workloads is accelerating that trajectory. Data centre capacity — both hyperscale and colocation — is expanding rapidly, but demand consistently outpaces supply in key markets, supporting strong rental growth and occupancy rates.
Fibre network infrastructure, the backbone of the digital economy, is experiencing a parallel expansion. Full-fibre broadband rollout programmes across Europe and Asia-Pacific require significant capital investment, while enterprise demand for low-latency connectivity to cloud platforms underpins commercial fibre networks.
Investment Characteristics of Data Centres
Data centres exhibit many of the characteristics that attract institutional investors to infrastructure broadly: long-duration contracted revenues, high barriers to entry, and power and connectivity moats that are difficult to replicate. Hyperscale leases to major cloud providers typically have 10–15 year initial terms with built-in escalators.
The energy intensity of data centres is both a risk and an opportunity. As AI model training and inference workloads grow, power availability — particularly from renewable sources — is becoming a critical competitive advantage for operators. Investors who understand the energy transition dimension of digital infrastructure are better positioned to assess long-term value.
Fibre Networks: Patient Capital Rewarded
Fibre network investments are characterised by high upfront capital requirements and a longer cash flow ramp-up compared to operational data centres. However, once a fibre network reaches maturity, it generates highly predictable, low-churn revenue from residential and enterprise customers with strong pricing power.
Government co-investment programmes in rural fibre connectivity — prevalent in the UK, Germany, France, and several APAC markets — reduce deployment risk and provide partial return guarantees, making regulated fibre assets particularly attractive to institutional investors with long-duration mandates.
Portfolio Allocation Considerations
Digital infrastructure now constitutes a meaningful and growing sub-sector within infrastructure allocations. We believe a dedicated 15–25% allocation to digital infrastructure within a diversified infrastructure portfolio is appropriate for most institutional mandates, providing exposure to secular growth themes while retaining the contractual, inflation-linked characteristics of the broader asset class.