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The data centre market has conventionally been viewed in much in the same way as the property market, yet the two couldn’t be more different. Data centres are not the same as real estate like shopping centres or office buildings, where the vast majority of the cost comes from the building itself. Data centres incur not only additional up-front capital expenditure on electrical and mechanical equipment, but also substantial operational expenditure on energy, maintenance and staff labour. Worse still, a lot of this capex and opex is wasted thanks to inefficient design and operation.

Real Estate agent For Sale
– Thinkstock / Andy Dean

Quite simply, even if everything in the initial build goes according to plan, most data centre investors have no way of understanding how their investment will perform in the long run. Unlike an office building, the hugely expensive equipment and machinery within a data centre will need a full refresh roughly every eight to ten years. Outside this cycle, changes in market demand can also necessitate a complete overhaul of machinery and equipment, just to remain competitive. Compare this to other property, the value of which can be increased simply by redecorating. If you invest in a data centre and assume that simply “sweating the asset” for a constant return will work, you may get a nasty shock down the line. Essentially, all you’ll have paid for is an expensive server museum that doesn’t meet modern IT needs.

For instance, beyond the underlying machinery and equipment, servers are expected to be renewed every three years. All of a sudden, the ten-year refresh cycle represents three generations of technology change! Furthermore, the need for efficiency improvement is driving advances in technology across the data centre such as liquid cooling, low power chips, or increased use of GPUs. Every one of these advances is further increasing the rate of change and the variety of demands on data centre infrastructure.

What this all boils down to is that, unlike real estate, data centres demand constant investment. If your data centre is approaching a decade old and you haven’t planned for this, you could end up with an expensive white elephant.