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Hines Eyes Move Into UK Data Centres And Self-Storage

Shoosmiths' Chris Morris, RSM's Stacy Eden, Related Argent's Jamie Smith, Brookfield's Ange Joseph and Hines' Ross Blair

U.S. investment and development giant Hines is planning moves into the UK data centre and self-storage sectors as it continues to expand into alternative real estate asset classes after announcing its first deal in the UK build-to-rent sector last week.

Hines is joining an increasingly crowded field of investors looking to capitalise on the growing data centre market. It has developed data centres in the U.S., and in 2022 it announced its first European development, partnering with operator Compass Datacenters for a scheme in Milan. 

“We're very actively trying to expand our footprint in data centres,” Hines UK Head Ross Blair told the audience at Bisnow’s UK Real Estate Outlook event last week at the London outpost of the University of Chicago's Booth School of Business. “I think there's a tremendous amount of institutional capital wanting to flow into that sector, so we're starting to invest more people hours in that space.” 

Blackstone has highlighted data centres as its next big thematic bet and last week announced it had bought a site in the north-east of England previously earmarked for a battery storage manufacturing plant for a huge new data centre campus. It bought the site through its QTS platform, through which it is investing more than $20B in the data centre sector. 

Starwood has allocated a portion of its next fund to the sector and earlier this year paid $850M for a stake in Irish data centre developer and contractor Echelon.

Real estate investors are moving into data centres because of the perceived imbalance between demand and supply, predicated on the digitisation of the economy and booted by the growing data centre needs of AI. 

Blair said Hines is also close to a deal in the self-storage sector in the UK, and he highlighted how it plans to expand in the UK living sectors — it also invests and develops in the student sector — if it can find schemes that don’t price out potential customers. 

“I guess the one caution we have there is just affordability,” he said. “It's all well and good buying in nice parts of London like this where perhaps people have a certain budget, but when you move to other parts of London or some of the regions, you're more challenged in terms of what it costs to build today versus what the end user can really afford.”

He added that the company still believes the best Grade A offices can command rents that make building them profitable, partly due to the lack of supply coming online over the next few years. He added the proviso that while inflation has stopped rising, construction materials and labour remain costlier than a few years ago.

Another investor looking to expand further into the BTR sector is Lendlease. The company is looking to add new projects to its portfolio following the completion of its Elephant Park scheme in south London. 

“In the UK, we are looking quite heavily at the BTR sector,” Lendlease Head of Acquisitions for Europe Elle Xu said at Bisnow’s event. “Today market penetration for BTR is less than 2%, and it will become more significant. It’s a sector where we will see some consolidation.”

Bisnow is holding a UK data centre real estate conference in London Thursday 25 April, featuring insights from sector operators and big investors like Blackstone. Sign up here.