Tritax Big Box REIT has purchased a 74-acre site at Heathrow, London, where it plans to build one of the largest data centres in the UK.

The Manor Farm site, which sits within the Slough Availability Zone – a key EMEA data centre location, has the potential to house a data centre scheme with up to 147 Megawatts (MW) of power.

Simultaneous to the acquisition of the land, Tritax Big Box has acquired a 50% share in a joint venture with a leading European renewable and low carbon energy power generator that will enable accelerated power delivery to the Manor Farm site using pre-existing grid connection agreements. (The acquisition of an interest in the JV is from its manager Tritax Management and constitutes a related party transaction under the UK Listing Rules, further details of which are set out below).

Tritax Big Box’s manager, Tritax Management, working with the JV partner, has created a further pipeline of potential data centre opportunities in key locations within the UK utilising power availability of c.1 gigawatt (GW).

[QD comment: This is a fantastic opportunity for Big Box and great news for shareholders. It again illustrates the entrepreneurial spirit of the company and its manager and is one of the benefits of an external management. Tritax Management has invested time and resources in uncovering opportunities in the data centre/power market for four years, and it will now hopefully pay off. The data centre market is a huge opportunity as an asset class for the real estate sector with AI taking off, and logistics developers are in a prime position to thrive. The development of a data centre is very similar to that of a logistics building, with increased and resilient power critical. In tying up that much needed power through the JV, Big Box seems to be on to a winner and the extended pipeline puts it in good stead to be the number one UK player in data centres – at a time when the hyperscalers are pumping billions into infrastructure spend, primarily in data centres.]

Manor Farm development details – anticipated 9.3% yield of cost

• The 74-acre Manor Farm site, located within the Slough Availability Zone near Heathrow Airport, is adjacent to key data cable routes providing high levels of connectivity and making it attractive to hyperscaler and co-location operators.
• The site has the potential for an initial data centre of 107 MW (Phase 1) on land currently used for open industrial storage, targeting commencement of construction in the first half of 2026.
• The site also offers the potential for further expansion with a possible second phase data centre (Phase 2) of 40 MW (both of which are subject to planning) bringing the site’s total potential to 147 MW.
• Phase 1 is expected to be one of the most advanced data centres in Europe totalling 448,000 sq ft of data halls across three floors.
• The JV provides the site with grid connections to two independent transmission substations providing resilience in addition to co-located utility scale battery storage.
• Targeting exceptional returns and accelerated timeline with 9.3% yield on cost and significant development profits
• The Phase 1 data centre will be developed on a “powered shell” basis, conditional on the receipt of planning consent and securing a pre-let.
• Indicative capex costs of approximately £365m are inclusive of land, construction, JV stake acquisition, transaction costs and fees, and the company’s 50% share of the power related infrastructure costs.
• The company expects to fund this project through a combination of existing financial resources and its ongoing capital recycling programme.
• With prime data centre assets currently commanding a stabilised investment yield of 5.0-5.5% the scheme is expected to deliver significant development profit, in addition to generating an attractive income stream and diversifying the company’s range of clients.
• A planning application for the development of Phase 1 has been submitted, and a determination is expected in H2 2025. Construction of Phase 1 is planned to commence in H1 2026, assuming a pre-let is achieved ahead of this, with practical completion and income recognition expected in H2 2027.
• The JV partner enables contracted and accelerated power delivery to Phase 1 of the Manor Farm site in H2 2027, using the JV partner’s pre-existing grid connection agreements.
• Through this approach, the manager has unlocked power faster than applying directly to the grid where power could have taken more than 10 years to secure.
• The JV holds the rights to the Manor Farm grid connections and will own the power infrastructure, with the JV partner responsible for the delivery of power and the associated infrastructure. Meanwhile, the company can utilise 100% of the power and is responsible for delivering the land and real estate components (which sit outside the JV and will be owned outright by the company).
• Based on independent valuations, given the intrinsic value of the JV attached to the land purchased, the company expects to benefit from an initial value increase above the cost of investment in the site.

Data centre sector and the JV pipeline

The company said that the data centre market is at a key inflection point, underpinned by long-term demand drivers and scarcity of powered land.

Global demand for data centres, driven by growth in cloud computing and higher AI adoption, is expected to rise between 19-22% annually from 2023 to 2030. Data centre providers are struggling to keep pace with strong demand for capacity. The market is constrained by significant barriers to new supply due to a lack of suitably located land with access to appropriate power within an acceptable timeframe.

The UK Government has recently classified data centres as critical national infrastructure, emphasising their importance to the UK economy. London’s global standing and connectivity has made it Europe’s primary data centre market and one of the largest globally.

Tritax Management has created a potential data centre pipeline of up to 1 GW. In a similar manner to land options used within the company’s development pipeline, the manager has built a pipeline of additional grid connection agreements across the UK which could provide c.1 GW of power for further data centre opportunities, beyond those at Manor Farm, and are expected to be deliverable from 2028 onwards.

Aubrey Adams, chairman of Tritax Big Box, commented:

“This is a decisive and exciting first step for the Company in the very attractive data centre market which the Manager has unlocked with its power and real estate capabilities. This gives the Company a considerable competitive advantage in capturing the growing demand for data centre infrastructure. The combination of Manor Farm’s prime London location and accelerated access to critical grid connection agreements creates the opportunity to develop quickly one of the UK’s largest data centres and deliver exceptional returns for our shareholders.

“Over the past four years, the Manager has independently developed and invested in its power capabilities, securing a joint venture arrangement with one of Europe’s largest major renewable and low-carbon energy generators which the Company is now acquiring at Manor Farm. This provides accelerated access to power in this prime data centre location, where a lack of power has significantly restricted the development of these nationally critical infrastructure projects. Having taken extensive and independent professional advice, the Board of Tritax Big Box has successfully negotiated preferential access and terms for this opportunity, which generates exceptional returns and complements our logistics development pipeline. The Board has also negotiated a right of first refusal with the Manager for all future data centre opportunities with up to c.1 GW of power capacity.”

Contractual arrangements

The land at Manor Farm is being acquired from Airport Industrial Property Unit Trust (AIPUT). The JV stake is being acquired from Tritax Management. 

AIPUT will receive an initial £70m consideration for the land at the Manor Farm site, based on a logistics underwrite, and a further consideration of 21% of the Phase 1 development profits, contingent upon full delivery of a practically complete and let data centre.

Tritax Management, which has made significant investments in its power capabilities, including establishing a dedicated power team who have been instrumental in originating the data centre opportunity for the company, will receive £6.1m in consideration for its 50% ownership of the JV, including a first right of refusal for the company on the manager’s data centre pipeline.

It will also receive a development management fee, in line with market terms, of up to 5% of the development cost of the scheme, contingent upon receiving planning consent and a profit share of 17.5% of the total Phase 1 development profits, of which 50% will be applied to the subscription or acquisition of shares in the company.

In connection with these arrangements, the company has entered into a development management agreement with Tritax Management pursuant to which Tritax Management has been appointed to provide development management and technical services, including pursuing planning, overseeing construction, pre-letting services, technical electricity expertise and overseeing the technical aspects of the company’s role in the JV and all power related elements.

The board said that it considers that the agreement regarding the development management fee and profit share payment is fair and reasonable as far as the shareholders of the company are concerned and the directors have been so advised by Jefferies International Limited in its capacity as sponsor.