Marcus Emadi | Director at Turning Point Capital
CONTENTS
Digital Infrastructure Is Now Industrial Infrastructure
The rise of data centres is no longer just a technology story—it’s a real estate one. In 2025, surging demand for cloud computing, AI processing, and enterprise storage is driving unprecedented growth in data centre development across the UK and Europe.
At Turning Point Capital, we see this as a fundamental shift in the industrial and logistics investment landscape. Power-intensive, infrastructure-led developments are emerging as core real estate strategies—blurring the line between digital and industrial assets.
What’s Fueling the Surge in Data Centre Development?
Several macro and structural trends are converging:
• AI adoption and machine learning demand massive computing power and low-latency connections.
• Cloud usage continues to grow exponentially across sectors.
• Regulatory data sovereignty rules are pushing hyperscalers to localise operations.
• Private capital availability for infrastructure is strong and looking for scalable, future-proofed deployment.
In the UK, take-up of data centre space has grown rapidly—particularly across the London–Cambridge–Oxford Arc and power-adjacent nodes in the Midlands and North.
How This Impacts Industrial & Logistics Real Estate
While data centres have traditionally been seen as a distinct asset class, in 2025 they are increasingly competing directly with industrial and logistics occupiers for land, power, and infrastructure.
Key impacts include:
1. Increased Land Competition in Strategic Locations
Data centres and logistics hubs often seek the same criteria:
• Proximity to fibre networks and energy grids
• Access to workforce and road infrastructure
• Regulatory flexibility for large-format buildings
This has driven competition—and price inflation—for zoned land in areas like Slough, Milton Keynes, and the Thames Valley.
2. Infrastructure Upgrades Driving Value
As demand for energy and digital resilience grows, sites with grid connectivity, cooling capacity, and planning permissions for high-spec buildings command premium valuations.
This is pushing logistics developers to partner with infrastructure providers and rethink power as a strategic asset—not just a utility.
3. Blurring of Uses and Design
Modern data centres share design elements with high-spec distribution centres:
• Clear height requirements
• Floor load tolerance
• 24/7 access and security
• ESG-compliant construction
Investors and developers are now designing hybrid “power and parcel” parks, allowing for flexible tenant mixes and adaptable future use.
Investor Implications: Opportunities in the Overlap
For institutional capital, the convergence of data centre and logistics demand presents multiple opportunities:
1. Strategic Land Aggregation
Forward-thinking investors are acquiring land near power substations, fibre lines, or strategic road nodes—even before occupier demand is confirmed. This land-banking approach is already generating outsized returns as planning pressure and grid constraints mount.
2. Build-to-Core and Core-Plus Development
Partnerships with operators or specialist developers in data infrastructure allow capital to underwrite long-term, tech-led tenancy while still benefiting from industrial real estate fundamentals.
3. Inflation-Resilient Income Streams
Like logistics, data centre leases often include power-linked or CPI-indexed rent uplifts, making them attractive for investors seeking income durability in volatile rate environments.
Challenges to Watch
While the long-term trend is clear, several near-term considerations matter:
• Grid capacity constraints remain a bottleneck in many parts of the UK.
• Planning permissions for data centre-like buildings can take time to secure.
• Capex intensity is higher than standard warehouse builds.
• Sustainability and ESG pressures are increasing scrutiny on power and water usage.
Experienced development partners, forward power agreements, and adaptive design strategies are essential to mitigate these risks.
Final Thought: Digital Infrastructure Is the New Frontier in Industrial Real Estate
The UK’s industrial and logistics market is undergoing a quiet evolution. As data consumption becomes the backbone of the modern economy, the real estate behind it becomes a core strategic asset.
At Turning Point Capital, we believe:
• Power and location are now co-equal value drivers alongside tenant covenants.
• Institutional investors must build conviction in digital-industrial hybrid strategies.
• The time to allocate capital is before the convergence is fully priced in.
Frequently Asked Questions (FAQs)
Why are data centres important to industrial real estate investors?
Data centres compete for the same land, power, and infrastructure as logistics users—creating opportunities and price uplift in strategic locations.
Which locations are most attractive for data centre-led logistics development?
Areas near grid infrastructure, like Slough, Milton Keynes, and parts of the Midlands and Thames Valley, are highly competitive.
What makes these investments attractive?
Strong rental growth, infrastructure-linked income, ESG alignment, and tenant demand driven by tech and cloud expansion.
Are there risks in backing data centre infrastructure plays?
Yes—especially grid access, planning, and construction cost volatility. Partnering with experienced developers mitigates these risks.
What role does private capital play in this trend?
Private capital is essential to funding speculative land aggregation, infrastructure upgrades, and adaptive site design that meets future hybrid demand.
