Land banks are playing a growing role in data center expansions, as developers seek out partners with extensive land holdings. The latest example of this trend is Digital Realty’s entry into Israel through a joint venture with Mivne, a real estate developer in Israel.
Land banking is the practice of buying parcels of real estate for future development, and is an important strategy in the data center business, where many strategic markets have a limited supply of development properties.
For Digital Realty, one of the largest global operators of data centers, joint ventures provide a strategic entry into new markets. The company says its presence in Israel will boost its offerings in the broader Mediterranean region, including campuses in Barcelona, Marseille and Athens. Israel is emerging as an alternative cable interconnect route between the Mediterranean Sea and the Red Sea, and the new Digital Realty campus will be located at a key intersection connecting Europe to Asia, the Middle East and eastern Africa.
Israel is also of growing interest to hyperscale operators, as AWS, Google, Microsoft and Oracle are all developing campuses, including some that will support government cloud platforms.
The new joint venture, known as Digital Realty Mivne, expects to develop a multi-tenant data center campus in Petah Tikvah, the primary connectivity hub in Israel. The data center campus will support up to 20 megawatts (MW) of installed IT load. Delivery of the initial phase is anticipated in 2023.
Digital Realty CEO William Stein said the JV with Mivne marks “the beginning of a new chapter” in the region.
“We expect this partnership to further accelerate our growth while enhancing our ability to support our customers’ digital transformation across the globe,” said Stein. “This partnership represents consistent execution towards new market entries. We are also gratified to partner with Mivne, leveraging its extensive experience as a local investor and operator. This announcement advances our strategy of developing strategic and highly connected, network dense data centers to strengthen and diversify Digital Realty’s portfolio and expand our product mix and global footprint.”
Mivne Real Estate has developed many large-scale projects across Israel and has an extensive land bank. Mivne has focused on residential properties and industrial and logistics real estate. Land banking is a common practice for developers in these specialties, who increasingly see data centers as a lucrative opportunity to make the most of their existing holdings.
But developing data centers is a specialized business, and working with established operators is often an entry point.
“Entering the field of data centers is a strategic growth engine for Mivne,” said David Zvida, Chief Executive Officer of Mivne. “Due to Mivne’s large and strategic land bank and its extensive geographical distribution across Israel, the joint venture will be able to develop strategically located, purpose-built data centers. This strategic partnership with a leading international operator such as Digital Realty, which has proven operating capabilities and extensive relationships with international customers and suppliers, will enable us to gain leadership in the Israeli data center market.”
A number of data center firms have recently partnered with logistics specialists, who typically have extensive real estate holdings in proximity to population centers, which are also key data center destinations as cloud platforms and video services seek to bring content closer to eyeballs. Examples include Skybox Data Centers partnering with Prologis, and Switch teaming with FedEx on edge computing.