User:CREinvestments/The impact of COVID-19 on Digital Real Estate & Infrastructure Assets

ENGW 3304

Unit 2: Wikipedia Article

Ryan Cotler

 Research Question:  How has consumer behavior, amid COVID-19, drawn attention to the global digital infrastructure and real estate eco-system?

 Purpose:  To explore the impact of Covid-19 and its influence on digital infrastructure and real estate assets.

What are Digital Real Estate & Infrastructure Assets?

Digital Infrastructure and real estate assets primarily consist of data centers, cell towers, fiber optic cables, and macro cell towers. Key infrastructure elements enabling the digital economy include: connectivity, devices and applications, and storage. Digital infrastructure assets facilitate the development of “smart cities,” the Internet of Things (IoT), 5G connectivity, and artificial intelligence.

 COVID 19 Impact on Digital Real Estate & Infrastructure Assets 

The corona virus brought attention to the importance of a strong digital ecosystem and tested the systems that support tens of millions of people in the U.S. and billions around the world. The world bank group has labeled our telecommunications infrastructure as “Mission Critical” as they claim a robust infrastructure is essential for:

“1. Providing business-critical connectivity and resiliency

2. Facilitating work-from-home arrangements

3. Keeping individuals and societies connected and informed, with access to medical, financial, commercial, and other essential services during mandated social isolation” (2020, p.3).

As the pandemic continues (as of July 2020) sweep across the United States (Insert Statistics as of 7/21/20), the future of work, education, and communication remain unknown forcing institutions to create digital contingency plans for the upcoming quarter, semester, year, etc.

 Inequality & Accessibility: 

The global inequality in digital connectivity stems from a lack of infrastructure investment and bandwidth in underprivileged and rural communities. This issue has yet to bring serious deliberation (Insert citation). Data from Asian Infrastructure Investment Bank (AIIB) (2020) reveals that for each 10% increase in broadband coverage (3G & above), there is a subsequent 1.38 % increase in GDP growth in developing countries. Furthermore, broadband and internet infrastructure and increased widespread connectivity have been shown to reduce poverty and improve gender equity in developing nations and in underserved communities in America (AIIB, p.26). Changes in consumer behavior due to Covid-19 have drawn attention to this widespread inequality. “The pandemic has greatly amplified the importance of having either a home or mobile broadband connection—ideally both. However, the economics of widely dispersed populations in rural areas mean large parts of America do not have very robust broadband service. It simply costs more to provide broadband in these places than providers can earn back. According to the best data available today, over a quarter of rural Americans do not have access to broadband with speeds of at least 25 Mbps download and 3 Mbps upload” (Para 15).

(MORE TO BE ADDED)

 Investor Sentiment: 

A recent global analysis done by the AIIB and McKinsey concluded that 72% of digital infrastructure investments are privately funded, 18% consist of public-private partnerships (PPP or “3P”), and only 9% is sourced from the public sector. The industry points to a greater trend in public-private partnerships. (insert link) The return on invested capital or “ROIC” (insert link) and increasing capital expenditures or “CapEx” (Insert link) make some projects in underserved areas less economically viable for investor backed funds (p.37). Insert map of America's broadband connectivity with an overlay of average annual income for that area (when zoomed in on a particular region).

 VALUATIONS 

--> How valuations have changed with investor demand, market sentiment, and consumer demand.

Recent Fundraising: More details to come…


 * Digital Colony Capital
 * REITS
 * GI Partners
 * 360 Capital

Natural Inter-dependency: Data centers cannot function without power, or without fiber -- and that fiber is useless without data centers. (Insert cite). Quote: “These digital infrastructure conglomerates will run not only the massive data centers that have become visible symbols of of the internet's growing use, but the energy infrastructure that powers them, the fiber optic cables that connect them to the outside world, the cell towers that connect people wirelessly to the cables, and the software that holds it all together.at connect people wirelessly to the cables, and the software that holds it all together.”

THE GLOBAL DATASPHERE

WTW - Explain what this means and why it is important.

 Contents: 


 * 1) The history of America’s Digital Infrastructure
 * 2) Current Behavioral & Market Influences
 * 3) Supply & demand side Shocks as a result of Covid
 * 4) Future outlook