SEGRO has announced plans to develop a £1bn data centre at Park Royal in west London.
The company has formed a joint venture with Pure Data Centres Group, owned by Oaktree, to finance the development of a 56MW scheme.
It said that it expects to pre-let the 30,000 sqm, three-storey building to a hyperscaler.
Gross capital investment is anticipated to be c.£1bn (of which SEGRO’s cash equity contribution will be £150m) and is expected to deliver a 9% to 10% net yield on cost.
Transaction summary
SEGRO said that the deal “brings together a 10-acre super-prime industrial site owned by SEGRO and 70MVA of power secured by Pure DC. It represents a highly attractive and profitable opportunity to deliver a data centre in a land and power-constrained key London Availability Zone where there is strong underlying demand; and allows SEGRO to benefit from Pure DC’s technical expertise in data centre fit-out and track record of working with hyperscalers”.
This will be SEGRO’s first fully fitted data centre project, having previously delivered powered shells to major data centre operators for over 20 years.
It added: “We see the potential for significant value creation utilising our 2.3GW land-enabled power bank and will seek to optimise and accelerate this over the coming years. The evolution of our data centre strategy to include fully fitted data centres will ensure that we can best access the demand in each of our markets and allows us to deploy capital at scale to generate significant development profits. For each site, we will pursue the model which offers the most attractive opportunity and risk-adjusted return.”
SEGRO and Pure DC are expected to each retain a 50% share in the project through to completion. No management or incentive fees are payable to either party. The gross capital investment is anticipated to be approximately £1bn and is projected to deliver an unlevered net yield on cost (based on future rents and costs, excluding finance cost as per the data centre market convention) of 9% to 10%.
In addition to contributing land, SEGRO’s estimated cash equity contribution to the joint venture is expected to be around £150m over the total construction period. The remaining construction costs will be financed by non-recourse bank financing, prior to the commencement of the construction.
Timeline
The clearance of the site will begin, planning will be submitted and marketing of the data centre capacity will commence now that the joint venture has been agreed. It is anticipated that the construction of the shell will commence in 2026 with the fully fitted space available for customer use from 2029.
Comments
David Sleath, chief executive of SEGRO, said: “Building on our 20 years of experience in the powered shell data centre market, we have been exploring how best to utilise our skills and 2.3GW land-enabled power bank to maximise the opportunity in this fast-growing sector.
“This innovative joint venture with Pure DC allows us to develop our first fully fitted data centre, alongside a highly experienced partner with an excellent track record of delivering world-class facilities to global hyperscalers.
“We expect this project to deliver an attractive risk-adjusted return and it will also help further strengthen SEGRO’s expertise in this area, enabling us to optimise and accelerate the significant value creation opportunity within our portfolio.”
Dame Dawn Childs, CEO of Pure DC, said: “SEGRO choosing to enter into a joint venture with Pure DC for its first fully fitted data centre development demonstrates our capability to create world-class digital infrastructure. Together we will develop a 56MW data centre in central London capable of handling next-generation cloud and AI workloads.
“This joint venture demonstrates Pure DC’s ability to scale in a rapidly expanding market, creating fresh opportunities for growth and investment. With over 500MW of data capacity in development or operation, Pure DC brings deep expertise building data centres and working alongside hyperscalers. SEGRO Park Premier Road, Park Royal is one of London’s most sought-after data centre locations and will help support the UK’s ambitions for digitalisation.”
Secretary of State for the Department of Science, Innovation & Technology (DSIT), the Rt. Hon. Peter Kyle MP said: “This announcement is another powerful endorsement of Britain as a home for tech investment, which will not only bolster the local economy and create job opportunities but also pave the way for a digital and AI-powered future.
“Private investment like this innovative partnership between SEGRO and Pure DC will help us ensure the UK has the digital infrastructure it needs to thrive, helping us harness the power of technology to grow the economy and raise living standards, the central missions in our Plan for Change.”
