big data

Data Takes Center Stage

Thriving technologies such as virtual reality, artificial intelligence, and cloud computing are leading to rapidly increasing global demand for faster connectivity and data storage.

Though still considered a relatively young asset class, investor appetite for data centers—the gigantic warehouses that hold vast numbers of computer servers that store, process, and distribute data—continues to grow in line with technology, which has impacted upon many areas of modern life and business. 

North American data center investment volume totaled more than $12 billion in 2018 (inclusive of single-asset, portfolio and entity-level transactions), according to CBRE research. Capital availability remained abundant throughout the year, with 33 percent of total investment volume focused on single-asset and portfolio transactions. This year’s volume is anticipated to total more than 2018 levels with several large M&A transactions closing.

Kristina Metzger, who oversees the Data Centers specialty practice for Capital Markets at CBRE, focuses her time advising domestic and offshore investors in the disposition and acquisition of these properties across North America.

Metzger has extensive knowledge and experience in data center real estate, having represented clients in transactions totaling more than $3 billion. Capital Watch caught up with Metzger to discuss this growing sector of commercial real estate that is rapidly moving into the mainstream, her career to date with CBRE, and how she balances work and family. 

What Does Your Role at CBRE Involve?

I collaborate with our investment sales, Debt and Structured Finance, and colleagues in the data center leasing space on the acquisition, disposition and recapitalization of data centers and telecom facilities across North America. I also work with our Global Workplace Services account relationships to execute monetization strategies for enterprise-owned facilities.

What is CBRE’s approach to Data Centers Capital Markets?

We engage the best team of diverse subject matter experts on each and every project. This often times means collaborating with our local office or industrial professionals, market leasing specialists, as well as data center facilities management and construction management. I am continuously impressed and motivated by the industry-leading talent at CBRE and so grateful to be able to work with these leaders.

What’s Been Your Biggest Success This year?

Growing CBRE’s market share and presence. In our first 12 months, we will achieve a 400% increase in transaction volume in data center asset sales. Our high percentage of the overall market share gives us a distinct advantage in driving value for our clients and achieving the best outcomes.

What’s Been Your Biggest Challenge?

Getting the word out about CBRE’s capabilities in the data center capital markets space. It is widely understood within the data center community that CBRE is the world’s largest data center facilities manager and we have a great team of real estate leasing specialists. Our access to global capital and investment banking capabilities are less known. We are working tirelessly to grow our brand recognition in these areas. 

Are There Any Industry Misconceptions About the Sector That Need to Change?

I am frequently asked if cloud computing will eliminate the need for data center facilities moving forward. It is quite the opposite. Cloud computing is driving the need for more data centers. As we all increasingly access information remotely all of that data needs to be stored. Around 90% of the world’s data was created in the last three years – the data center market continues to see exponential growth as a result.

How Do You Achieve a Successful Work/Life Balance?

I am fortunate to have a great support network of friends and family both inside and outside of the office. Our household is very dynamic as my husband and I both work full-time and equally parent our two sons, Gavin (3) and Conor (1). We would not be able to do it without the great support of close friends, family and incredible colleagues. Our boys do a great job of keeping me balanced and reminding me what is most important, to stop and smell the roses, or in our case, to run around and play in the dirt.

Fuddy Duddy

Andrew McAfee, co-author of several books on how technology is going to rapidly change our world, spoke recently at the CBRE Institute | Global Forum, a terrific occupier focused thought leadership program, in Scottsdale, Arizona.

According to Mr. McAfee, Artificial Intelligence “AI” is now superior to humans in several ways thought unimaginable as recently as five or ten years ago, including its ability to drive cars, sense human emotions through facial gestures, and, perhaps most important, beat humans at game shows like Jeopardy.   AI, powered by its close cousin “big data,” will make all human life better and more productive—except of course for the millions of folks whose jobs will be eliminated by technology.

There has been some controversy around Mr. McAfee’s ideas, most recently presented by Robert Gordon in The Rise and Fall of American Growth. According to Mr. Gordon, productivity of the average worker in the U.S. has been slowing since 1970 and the fall has accelerated since 2004 (after a brief rise from 1994-2003). In 2015, worker productivity barely increased at all.

Mr. McAfee was quite familiar with Mr. Gordon’s counter-arguments. He told me that Mr. Gordon was just wrong in suggesting that new technologies weren’t helping us be more productive.  It turns out that Mr. Gordon is what the Silicon Valley crowd calls a “Techno-Pessimist,” which is one step up the evolutionary chain from “Fuddy Duddy.”

Well, what is happening to the productivity of the average American worker? Looking at this on a micro basis (the day-to-day activities of working), one can start to look at reasons for flagging growth. Peter Drucker, the great management guru, encouraged executives to ask the “Naive Question” when analyzing their business, a question that is unbound by an assumption about the “right” way to do things.  So when I took the stage after Mr. McAfee, I asked the audience a naive question:

If you could take your average workday from eight hours to six hours, but you were required to leave all of your personal electronic devices at the door, and would not have internet access except through a central station in the middle of the floor where you could go to the web anytime you wanted (and there are only enough work stations for 10% of the office workers so you had to share and be strategic about when and how to use it), would you do it?      

Not a single hand went up. Maybe people felt that instantaneous access to the internet is so vital to their work lives that being without it would be disruptive; but would it be more disruptive than the 60% of the time they spend, on average, using the internet and other electronic IT during work hours, including 30% spent on reading and returning e-mails? I suspect that more than a few of them got my point, but didn’t want to look like a Fuddy Duddy in front of their peers. Hours worked doesn’t determine productivity. Output per hours worked does, and changing the hours of work (as well as limiting some needless distractions) may lead to surprising productivity gains, not to mention, more free time.

The Techno-Optimist in me compels me to concede (as does Mr. Gordon) that I don’t think that technology is the cause of our drop in productivity.   There are far bigger macro headwinds including demographics, huge state and federal debt and political intransience.     Some even suggest that GDP growth is the wrong measure of worker productivity altogether as it doesn’t measure the value of the free-time, and our statistical measures might just be plain wrong.    In short, tech may be part of the problem, but it is likely a much bigger part of the solution.

While being hip and cool is pretty awesome, I don’t think we should jump headlong into every hip, cool tech in the workplace just because everyone else is doing it. Folks should approach workplace strategy in a clinical and disciplined manner. Chasing the latest tech fad is no more advisable than investing in emerging market real estate because it is the “next big thing” without some serious underwriting. Our choices about how to design the workplace must vary based on industry, geographic location and the overall goals of a business. Don’t be afraid to unleash your inner Fuddy Duddy and ask the “Naive Question.”

By Spencer Levy, Americas Head of Research, CBRE.