DC Byte, a leading data centre research and analytics platform, has shared the latest statistics and insights from its most recent Data Centre Report, published in partnership with Knight Frank, a leading global property adviser.
While 2021 initially brought uncertainty as to what demand would look like after the increased buying cycles accelerated by the global pandemic, supply growth in fact continued to be strong across EMEA. The market now shows signs of settling on continued core expansion and moderate expansion in new markets outside of Frankfurt, London, Amsterdam, Paris and Dublin. Hyperscalers drive continued cloud demand across both markets.
Of the leading markets, development has been most notable in Dublin and London, with Q2 growth of 146MW and 122MW respectively. For Dublin, this is a significant expansion almost matching the total for 2020, and higher than the Q1 expansion at just over 100MW.
London’s growth in Q2 2021 matched the pace of Q2 2020 growth. London’s take-up in the same timeframe was 25MW, demonstrating the strength of a colo-dominated market alongside the agility of progressing planned development. US public cloud operators are also now assessing potential self-build cloud infrastructure expansions in London as demand for cloud services grows; while Google’s purchase of land in Broxbourne, and AWS acquiring a site in Didcot, marks a significant shift in market dynamics.
Added to the EMEA market profiles in Q2 is Nigeria which continues to undergo rapid expansion. Africa Data Centres is entering the Lagos market, while MainOne is building its second data centre in the city. Cloud Exchange West Africa is building its first data centre in Nigeria, in partnership with Huawei.
Ed Galvin, Founder and CEO at DC Byte, said: “We expect the trend toward expansion across EMEA, outside of FLAPD, to continue. On the hyperscale horizon, 2021 will see facilities in seven markets come online as Belgium, Denmark, Finland, Spain and Sweden all add capacity, in addition to the core markets of Amsterdam, which is rapidly evolving into both a colocation and enterprise hyperscale location and Dublin. This is a record for a single year. Istanbul and Warsaw are other ‘Edge’ markets to keep an eye on.”
Looking to the APAC territories also covered by The Data Centre Report, take-up across the region in the second quarter was again around 95MW, on par with the quarterly average recorded in 2020 and the 75MW in Q1. Supply increases remain healthy, growing by over 700MW in Q2.
Specifically, Tokyo led the supply increase with nearly 250 MW, driven by announcements from Princeton Digital Group, Lendlease and Vantage, while Shanghai added just over 200 MW. Shanghai’s Q2 growth brings the 2021 increase to about 75% of the growth seen in 2020, with increasing interest from hyperscalers in this market. Seoul added 90MW of supply which increases supply overall by 23%. Mumbai’s growth is still strong with 24MW added in Q2.
Stephen Beard, Partner and Co-head of Global Data Centres at Knight Frank, said: “The data centre landscape continues to evolve rapidly as operators compete to secure land, develop new sites and increase market coverage.”
We asked industry experts where they think will be the most popular region for data centre development over the coming year and why.
Russell Poole, Managing Director UK, Equinix
Business Digital Transformation is advancing at a significant pace across Europe, the Middle East and Africa (EMEA) which is attributed to a growth in enterprises taking advantage of the availability of digital infrastructure service providers. This symbiotic relationship has created a snowball effect with almost half (47%) of EMEA’s IT professionals now migrating critical applications to cloud service providers to gain a greater competitive advantage.
In addition, the past two years has seen the pandemic force many companies to digitise their business models which has intensified the demand for flexible digital services. And while COVID-19 continues to spread, there is hope at least in some parts of the world that the vaccine will begin to slow infection rates. Companies in the UK and Europe are already making preparations for a period of slow but purposeful recovery. These economies are going into digital overdrive, with enterprises implementing the expansion and deployment of digital infrastructure at a rate four times faster than pre-pandemic levels.
Equinix’s annual Global Interconnection Index forecasts that Frankfurt, London, Amsterdam and Paris metros will make up the largest in overall EMEA interconnection bandwidth capacity by 2024, with 75% of the regional mix. London is predicted to be the epicentre of data centre development as British tech firms in sectors such as FinTech, e-commerce and digital health continue to grow at an exponential rate. The city is expected to grow at a 45% compound annual growth rate (CAGR) year-on-year, contributing 1,735 Tbps by 2024. This bandwidth is almost three times higher than Paris, more than twice the Tbps of Amsterdam and double that of Frankfurt.
This further cements London’s position as a strategic interconnection hub for digital businesses looking to compete on a global scale, despite the UK’s departure from the European Union and the disruption brought about by the pandemic. The city continues to lead EMEA for industries reliant on interconnection, for example cloud and IT services, banking and insurance, and securities and trading. As such, it will need to be the focus of continuing data centre development to accommodate the predicted surge in interconnection bandwidth requirement.
UK industries, many of which have been hit hard by COVID-19, have embraced a digital-first strategy to develop new business revenue models to aid their post-pandemic revival. They see this as an essential pathway to achieve the level of agility and resiliency that is required to outpace and out-innovate their competitors. And as the UK reinvents itself as a vibrant tech nation post-Brexit, it will be championing emerging verticals, such as AI and cybersecurity, which will see demand for interconnectivity increase still more.
Josh Buis, Senior Vice President, Business Development, EMEA & APAC, Vantage Data Centers
Vantage is seeing strong demand from customers for high-quality, hyperscale data centre facilities across the globe. Predicting one region’s popularity over another can be dynamic.
The European data centre map is expanding rapidly, providing cloud provider companies with more opportunity to bring their services closer to their customers, enabling them to provide better services and satisfy local data privacy regulations. At the same time, they can grow commensurate with increased demand. With more third-party data centre availability and choice, companies in need of data centre space can also be relieved of the burden of CapEx and the time required in attempting new builds, not to mention finding skilled engineering and construction personnel in each market, leaving this in the hands of the operators.
Central and Eastern European governments are accelerating the Digital Transformation of their countries, bringing more demand for colocation and cloud hosting data centre providers. In turn, providers are taking advantages of available land, competitively priced power and rich connectivity. Poland is taking the lead as the digital hub between Western and Eastern Europe. Switzerland has recently experienced a notable number of new hyperscale additions. The country has distinguished itself from its neighbours by its political and regulatory environment, along with its high bandwidth and central location in Europe. Privacy laws that require data to stay within the geographical boundaries of a country are also contributing to the growing need for data centres in Tier II markets.
The pandemic has also added to the urgency for European cloud providers to expand beyond the traditional FLAP markets and regionalise their data centre strategies. Rising demand for content, streaming and collaborative services is driving the need for data centres to be located closer to customers to reduce latency.
Beyond Europe, in South Africa, Johannesburg is the data centre hub for sub-Saharan Africa due to its strategic location, IT ecosystem, fibre connectivity to the rest of Africa and the availability of renewable energy. As the industry continues to grow, there will be a greater need for large-scale data centres in strategic locations across Africa.
Asia Pacific is another high-growth region, including Hong Kong, Japan, Malaysia and Australia. Canada also remains one of the most in-demand geographic locations for hyperscale companies with a plethora of connectivity options and abundant, clean sustainable energy. Montreal, for example, is ideally located for hyperscalers looking to deliver service to customers in large east coast cities in both the US and Canada with limited latency.
Venessa Moffat, DCA Advisory Board Member, and Mark Acton, DCA Advisory Board Member
The data centre sector has experienced strong momentum in 2021 and is expected to continue into the coming year. The main drivers behind this growth are:
- Significant additional levels of funding available as a result of investors moving away from more traditional asset classes to data centres, which can show significantly improved returns.
- The next new normal in the form of remote work, re-architecting to support greater volumes of digital services.
- Digitisation of existing business processes and Digital Transformation of sectors such as construction.
- Growing use of Over-the-Top (OTT) services by traditional telecoms providers, a method of delivering film and television directly via the Internet.
- Development of data-generating and data-hungry technologies, and recognition of the increasing capability and value of data analytics such as available from IoT, Edge and Smart City initiatives.
- The continuous adoption of cloud services and increasing hyperscale infrastructures.
All of these trends are driving change across the globe and of course 5G will be an enabler for network growth too. Additionally, huge investment in ambitious new subsea cables are bringing opportunities to build and operate large data centres in locations that have previously not had this capability. This is offering digital infrastructure to significant populations which are currently underserved. The landing points for those cables will provide the connectivity and bandwidth required by larger data centres to support the capacity and Edge infrastructure needed to accommodate the increase in digital services, data processing, storage and data transmission – all with the low latency now expected by populations in all parts of the world.
Other factors in choosing locations for data centres include the following:
- Safety and security
- Political stability
- Reliability of grid energy
- Low likelihood of natural disasters such as earthquake, flood hurricane etc.
- Environmental sustainability factors such as renewable energy sources
- Diverse high bandwidth network connectivity
- Internet download speed / current telco infrastructure
- Total cost of ownership (inc. real estate and energy)
- Favourable local taxation and regulation environment
- Proximity to end-users (for Edge)
- Availability of grid energy (Ireland, Netherlands, Singapore)
- Proximity to skilled labour
- Data sovereignty – control over citizen data
Taking all of the above into account, we think it will be unlikely that the highest growth will be in tier 1 cities, such as London, Amsterdam, Frankfurt and Paris. With the addition of more Edge infrastructure, we’ll be looking more towards tier 2 and tier 3 cities for higher growth and investment. The exciting regions to keep an eye on will be various parts of Africa where the subsea cables land. With renewable energy supplies becoming more of a genuine option, we might start to see some innovative designs come along with the levels of investment now available. Lastly, the Nordics will continue to be a good option and will experience steady growth over the coming year.
David Friend, CEO & Co-Founder, Wasabi
According to IDC’s Worldwide Public Cloud Infrastructure as a Service Market Shares, 2020 Report, the global public cloud Infrastructure-as-a-Service (IaaS) market grew to US$65.5 billion in 2020. The EMEA region on its own grew by 31% as enterprises pivoted over the pandemic to support distributed workforces and digital interactions with customers while generating more data than ever before.
With Gartner predicting worldwide end-user spending on public cloud service to grow by 23.1% in 2021 to total US$332.3 billion, it’s no surprise data centre expansion is a big priority for many cloud businesses. The short answer is data centre development is a focus all over the world, as data proliferates and accommodating customers with data sovereignty concerns presents a big opportunity in local markets.
The UK is a particularly burgeoning market in light of Brexit, where concerns around data security have led to regulatory diversions and increasing costs to comply with country-specific data protection laws. That said, there is a big opportunity in Europe more generally, with so many large businesses, institutions and technology companies needing to store growing amounts of data in locations like the UK, Germany and France.
In European markets, rapidly growing customer demand for cloud storage service in sectors as varied as higher education, media and entertainment, surveillance, automotive and AI developments highlight significant growth opportunities for cloud companies looking to expand their data centre footprint. And to contend with the three hyperscalers, there has been a proliferation of service providers that enable companies to store their data much more affordably, creating greater choice for the customer. Having local data centres in this market enables cloud providers to serve the huge customer demand, ensure lightning-quick exchanges, decrease latency and better secure their data.
Rowland Kinch, CEO at Custodian Data Centres
We are certainly seeing some shift in focus for new data centre developments with markets in APAC and MENA growing at a rapid rate. These areas are now starting to see the benefits of large-scale developments from the major providers and is something that will continue over the coming years. As these emerging markets start to realise the benefits of having increased connectivity and broader IT infrastructure capacity – this trend is only going to continue.
This is compounded by challenges in more established and mature markets in the UK and the wider EU. Power availability, land acquisition challenges, legal proceedings and increased competition make APAC/MENA certainly a more appealing area to develop in the medium term. It is not without its own challenges – with resource availability and a vastly different legislation process all things to be considered.
One area that is certainly developing and evolving is the rise in ‘out of city’ data centres, specifically within the UK. Increasingly, businesses are no longer as restricted in having to have their data centre in major conurbations like London. As the working world evolves and the quality and size of data centres outside of London improves, businesses can house their infrastructure in more accessible, local sites. This trend is supported by our own developments in the South East and the growing demand for space and colocation outside of London.
We see this development in data centres being more strategically placed around the UK continuing as businesses look for locations that offer greater resilience and reduced risk. Aligned with improved connectivity and increased ‘remote hands’ means enterprise customers are seeing saving opportunities without the compromise in performance or standards. There will always be specific industries that require a presence in the major cities, but for many other sectors, that ability to have a ‘choice’ that isn’t just London is a trend we only see increasing into 2022.
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