Equinix, one of the world's largest digital infrastructure companies, has signed a joint venture agreement with Singapore-based GIC Real Estate and the Canada Pension Plan Investment Board with the intent to raise over 15 billion U.S. dollars for data center development in the United States.
While GIC and Equinix entered into a similar joint venture in Europe three years ago, the new undertaking is intended to accelerate the Equinix xScale data center portfolio. At full build-out, the partners expect to nearly triple the investment capital of xScale, which through August had raised US$4.7 billion, according to Equinix.
Robust demand from cloud computing and artificial intelligence led to a significant increase in data center construction in the first half of the year, according to CBRE research.
With the capital raised, Equinix expects the joint venture to purchase land to build new xScale facilities on multiple greater-than-100-megawatt campuses, eventually adding more than 1.5 gigawatts of new capacity for hyperscale customers. Each megawatt can power up to 900 homes.
This past summer, Equinix closed on land deals for its first multihundred-megawatt xScale campus in Atlanta and another in Dallas, the Redwood City, California-based firm said in August.
"As the world's leading companies build out their infrastructure to support key workloads such as artificial intelligence, they require the combination of large-scale data center footprints,” Adaire Fox-Martin, CEO and president of Equinix, said in a statement.
Data center growth
Data center supply in primary markets rose by 10%, or 515 megawatts, in the first half of the year, and by 24% year over year. Construction in primary markets reached a record high of 3,872 megawatts, up 69% from a year ago.
Despite this supply growth, the overall vacancy rate hit a record low, resulting in higher prices and sharply increased capital flows targeting the sector, according to CBRE. Nearly 80% of the 3,872 megawatts under construction in primary markets was preleased.
"This investment will help meet the increasing demand for data centers driven by rapid technological advancements and marks a significant step forward in our broader data center strategy,” Max Biagosch, senior managing director, global head of real assets & head of Europe for CPP Investments, said in a statement.
Equinix has a longstanding relationship with GIC, having previously partnered on xScale projects in Asia, the Americas and Europe. This new agreement represents the first joint venture between Equinix and CPP Investments.
Under the terms of the agreement, CPP Investments and GIC will each control a 37.5% equity interest in the joint venture, and Equinix will own a 25% equity interest. Each party has made equity commitments, and the joint venture also expects to take on debt to raise the total pool of investable capital to more than US$15 billion over time.
The closing of the joint venture is subject to the receipt of required regulatory approvals, which are expected to be received in the fourth quarter.