Javid Patel joins RICS working group rewriting data centre valuation guidance

Javid Patel, Senior Director and head of public sector, strategic advisory and transactions, has joined the RICS expert working group rewriting the institution’s practice guidance on the valuation of data centres. The current guidance was published in 2011, and the group has been set a target of producing a replacement within twelve months.

RICS classifies the document as practice guidance, meaning it sets out best practice and recommendations rather than mandatory requirements. The 2011 version predates most of what now defines the sector: the rise of hyperscale facilities, the surge in demand tied to artificial intelligence, and the new customer types that have emerged with that demand. The rewrite is intended to broaden the guidance beyond valuation, taking in infrastructure, cost management, capital markets, and the way contracts and leases are now written.

Why the 2011 guidance no longer fits the sector

The group has settled on discounted cash flow as the primary method for valuing stabilised assets, but Patel advised that, as we are seeing increased land sales, development land values will need to follow a carefully structured residual appraisal.

The difficulty is that these methods have grown far more sensitive as schemes have got larger, particularly for the AI-driven developments now coming forward. Small changes to the assumptions on capital expenditure, on the power a site has actually contracted, and on the discount rate applied can move a valuation considerably, and those assumptions vary from one country to the next.

A related problem is evidence. Much of the relevant market data sits behind confidentiality agreements, which limits the benchmarking valuers can rely on. The group has also been clear that valuers without specialist knowledge of the sector risk material errors, given the scale of the figures involved.

What Patel brings to the group

Patel has worked in property for more than thirty years, at firms including Cushman & Wakefield before BTG Eddisons, and advises on data centres from both a valuation and a transactional standpoint. His experience runs from valuing and acquiring operational facilities to handling land for edge developments and disposing of sites for hyperscale schemes.

His early priority for the rewrite is definition. “The first task is to be clear about what we are actually valuing. The asset types are not interchangeable, and the methodology and assumptions follow from that,” he said. “Alongside discounted cash flow for stabilised assets, the guidance needs to deal properly with development land, colocation sites, and questions such as the gap between the computing load a facility can run and the power it has under contract.”

Where this leaves BTG Eddisons

Having a member of the firm on the group that writes the guidance puts BTG Eddisons close to the standards the wider market will be expected to work to. The sector has moved quickly since 2011, and the update reflects RICS’s own recognition that the guidance needs to catch up with how the market now works. What’s more, guidance produced by people active in the market carries more weight than a framework assembled at a distance.

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