Data Centre Infrastructure Growth in a Digital-First Economy: Strategic Allocation and Long-Term Value Creation

The digital-first economy is reshaping global infrastructure demand, with data centres emerging as critical assets for institutional investors seeking long-term value creation. As artificial intelligence (AI), cloud computing, and the Internet of Things (IoT) drive exponential data generation, the data centre infrastructure market is poised for transformative growth. By 2034, the market is projected to expand from USD 4.37 billion in 2025 to USD 16.90 billion, reflecting a compound annual growth rate (CAGR) of 16.2%, according to Precedence Research. This trajectory underscores the strategic importance of data centres as a core component of modern capital allocation strategies.

Market Dynamics and Growth Drivers

The surge in demand for data centre infrastructure is fueled by three interconnected forces: digital transformation, cloud adoption, and AI workloads. According to a report by Precedence Research, 65% of enterprises are migrating workloads to the cloud, while 54% are expanding hybrid cloud infrastructure. Simultaneously, Deloitte projects AI-driven operations alone are expected to consume 536 terawatt-hours (TWh) of electricity in 2025, nearly doubling to 1,065 TWh by 2030 (Deloitte).

Edge computing further amplifies this demand by decentralizing data processing to reduce latency in applications like autonomous vehicles and smart cities, a dynamic highlighted by Precedence Research. However, the industry faces challenges, including energy consumption and cooling complexities. To address these, sustainability initiatives-such as liquid cooling systems and renewable energy integration-are becoming standard practice, as noted by Precedence Research.

Strategic Asset Allocation and Institutional Investment

For institutional investors, data centres offer a unique blend of growth potential and stable cash flows. As highlighted by Dafinchi AI, the sector's dual role in enabling digital innovation and generating predictable revenue streams has led to its inclusion in core portfolios. Companies like DigitalBridge Group (DBRG) and Tetra Tech (TTEK) are leading the charge, with DBRG planning USD 28 billion in capital expenditures over 24 months and TTEK targeting USD 500 million in digital systems revenue by 2030.

Regional trends further validate this allocation logic. According to CBRE, Northern Virginia's data centre inventory surged by 43% year-over-year in Q1 2025, driven by hyperscale and AI startup demand. Meanwhile, Europe's growth is constrained by power shortages, but secondary markets in Asia-Pacific-such as Johor, Malaysia, and Melbourne-are emerging as high-growth corridors. Latin America, too, is gaining traction, with São Paulo's 493 MW inventory underscoring its strategic appeal.

Sustainability as a Value Driver

Sustainability is no longer a peripheral concern but a central determinant of long-term value. As Deloitte notes, data centres are projected to account for 2% of global electricity consumption in 2025. To mitigate this, operators are adopting metrics like power usage effectiveness (PUE) and integrating renewable energy. NTT DATA Global Data Centers, for example, aims for net-zero emissions by 2040 through AI-driven cooling optimization and increased renewable procurement.

Investors are also prioritizing environmental, social, and governance (ESG) frameworks. Siemens' proposed 28 sustainability metrics-spanning energy, emissions, water, and waste-provide a standardized benchmark for evaluating ESG performance. These initiatives not only align with regulatory trends but also enhance asset resilience against energy price volatility.

Exit Strategies and Risk Mitigation

Private equity investors in data centres have multiple exit avenues, including initial public offerings (IPOs), real estate investment trust (REIT) conversions, and strategic sales. The choice depends on market conditions and growth trajectories. For instance, REIT conversions offer liquidity while maintaining alignment with long-term infrastructure needs, as noted by Dafinchi AI.

However, risks such as energy constraints and geopolitical uncertainties require diversification. The rise of small modular reactors (SMRs) could redefine site selection by 2030, offering reliable power for high-density AI workloads, a trend highlighted by CBRE.

Conclusion

Data centre infrastructure is a linchpin of the digital-first economy, offering institutional investors a compelling mix of growth, stability, and ESG alignment. As AI and cloud demand surge, strategic allocation to this sector-coupled with a focus on sustainability and regional diversification-will be critical for capturing long-term value. With the market set to expand at a 16.2% CAGR, now is the time to position portfolios for the next decade of digital transformation.