Morgan Stanley Infrastructure Partners has acquired a partial controlling interest in data center provider Flexential, an investment the firms say will fund the expansion of the Denver-based provider’s data center portfolio.

While the terms of the deal haven't been disclosed, MSIP’s equity investment will make it a co-control investor alongside Flexential’s parent company, GI Partners. The transaction is expected to close before the end of the year.

Flexential operates 42 data centers in 19 markets, with 325 megawatts of capacity operating or in development. Founded by GI Partners in 2017 through the merger of two smaller data center firms, Flexential’s business model is primarily focused on retail colocation, with tenants ranging from enterprise customers to Big Tech cloud providers. GI Partners has invested around $1B in Flexential over the past decade, according to the firm.

The company has already embarked on several development efforts to expand its portfolio over the past 18 months. In May, Flexential announced the development of its fifth Denver-area data center, a 22.5-MW facility in Parker, Colorado. Last year, the firm unveiled plans for expansion of its capacity in two key markets, with an additional 110 MW of new construction planned at its sites in Atlanta and Oregon.

"The new partnership with Morgan Stanley Infrastructure Partners, combined with the strong foundation laid with GI Partners, represents a tremendous opportunity for Flexential to further accelerate our growth trajectory and sets the stage for future strategic opportunities," Flexential CEO Chris Downie said in a written statement.

MSIP is the private equity infrastructure investment division of financial giant Morgan Stanley, funded primarily by pension providers, sovereign wealth funds and insurance companies. Its equity stake in Flexential is the latest in an accelerating wave of capital flowing toward data center firms from large institutional investors and private equity firms.

Last week, DataBank completed a $2B equity raise backed primarily by pension fund AustralianSuper. This came less than two weeks after reports that private equity investor Blue Owl Capital is in talks to acquire digital infrastructure investor IPI Partners, the parent company of data center firms Stack Infrastructure and RadiusDC. In September, New Mountain Capital acquired a majority stake in data center management firm Salute.

The data center merger and acquisition market has risen sharply in 2024, and deal volume could hit record totals. M&A activity reached nearly $40B in the first half alone, exceeding 2023’s total transaction values. The biggest deals in the first half were EQT’s equity stake in EdgeConneX and Vantage Data Centers’ $9.2B equity investment led by DigitalBridge and Silver Lake.

Institutional investors are ramping up to accelerate their investments in data center providers, with data centers constituting a rapidly growing share of real estate investment targets.

BlackRock and Microsoft announced in September that they are raising $30B for an artificial intelligence data center fund, a partnership that also includes asset manager Global Infrastructure Partners and United Arab Emirates-backed tech fund MGX. Last week, Blackstone executives indicated the firm is continuing to increase its investment in data center development to control as much as 40% of the sector globally, making it the world’s largest owner of data centers.