Europe, Middle East and Africa

1 UK

London

Data centre market context

London is recognised by most as the European capital for business, and the centre for trade and commerce. Today, London has the largest stock exchange in Europe and is currently the top-ranked financial centre in the world.

It also hosts the largest data centre market in Europe by total supply, and the second largest in the world. Slough and London Docklands remain key locations, but developments are springing up along the “M4 corridor”, Greater London and in the “Home Counties”. The definition of London in this marketing context is perhaps more realistically the South of England.

Construction market conditions and publicly known projects

Despite the concerns surrounding the final Brexit deal, data centre construction market conditions for London have been hot. With other European data centre hub locations in similar conditions, UK contractors are being understandably selective with their interest in new projects.

Colt (Welwyn Garden City), Digital Realty (Crawley), Equinix (Slough), Fujitsu (Stevenage), Global Switch (Docklands), Gyron (Hemel Hempstead), Interxion (City), Telecity (Docklands) and Virtus (Stockley Park and Slough) all have had either expansion and/or tenant fit-out projects in 2018.

CloudHQ in Didcot and the Gyron/e-shelter developments in Dagenham, East London were two of the more notable new projects underway in 2018. Though new powered shell projects are also underway in Slough, with customers not publicly listed.

In addition, Alibaba Cloud has just opened two new cloud availability zones in the London area through a partnership with a so far unconfirmed data centre partner, to help launch a wider assault on both the UK and wider Europe, the Middle East and Africa market.

2019 outlook

There are no signs of UK operators slowing down, though the uncertainty of Brexit in March of 2019 – the potential for businesses to relocate offices and/or production to continental Europe – has unknown consequences.

It is clear that European markets are readying themselves for any fall-out.

2 Europe

Denmark, Copenhagen

Data centre market context

Like its Nordic neighbour Sweden, Denmark boasts impressive green energy credentials, targeting 50 percent of its energy sources to be renewable by 2030. Currently, about 43 percent of electricity consumed in the country is provided by wind energy. Denmark is 90 percent self-sufficient in terms of energy sources, with additional energy required being imported from Germany (solar), Norway (hydropower) and Sweden (nuclear).

To keep in competition within the Nordic region, Denmark is also aiming for its local Public Service Obligation (PSO) tax on electricity to be reduced in stages and eliminated by 2021.

The Danish construction market is limited in size and employment is extremely low (3.9 percent reported in August 2018). The trend has been for data centre owners (Hyperscale and colocation) to turn to the UK and Ireland for GC and/or MEP contractors.

Construction market conditions and publicly known projects

Apple and Facebook were the first to bring hyperscale development to Denmark, both with active construction in 2018, driving the hot construction market conditions.

Copenhagen is home to the majority of colocation data centres in the country, with Interxion committing a capital expenditure of €18m to expand CPH2 by 1,500 square metres for completion by first quarter of 2019. Nordic data centre service provider DigiPlex is also entering the Danish market with 1,600 square metres of white space in a data centre facility in Copenhagen.

2019 outlook

Facebook is reportedly planning a further hyperscale data centre in the seaport town of Esbjerg, Southern Denmark, offering 250,000 square metres of space, making it the country’s largest data centre hub.

With both Google and Microsoft known to be building their own hyperscale campuses in the market during 2019, we only see the conditions moving from hot to potentially overheating.

 

 

France, Paris

Data centre market context

France has the third largest economy in the European Union after Germany and the UK and continues to feature in the top four data centre markets for the European region.

Land and power limitations in the capital are perhaps part of the reason there is a marked rise in investment in other cities in France such as Lyon, Marseille and Strasbourg. While Lyon is regarded as France's second city and attracts big development, it is currently being overshadowed by recent data centre projects in Marseille, where the major landing cables en route to the rest of Europe are being expanded. Both Colt and Interxion, have extended their business there as a result. 

In an attempt to attract further foreign investment, the French government announced a reduction on tax paid for electricity consumption by data centres from €22/MWh to €12/MWh from 2019.

When compared to competing data centre locations of London, Frankfurt and Amsterdam, Paris is considered by many as the most difficult location to build. Success is dependent on a thorough understanding of local law, codes, and contract and procurement methodologies.

Construction market conditions and publicly known projects

The overall data centre construction market conditions for Paris in 2018 are considered warm.

In the first half of 2018, Microsoft opened three data centres in Paris and one in Marseille.

Equinix also plans to open its first International Business Exchange (IBX) data centre in Paris dedicated to its leading cloud customers in 2019. This will be PA8 IBX, its eighth Equinix data centre in the Paris metro.

Interxion has earmarked €44m in capital expenditure to add 2,500 square metres of white space to its Paris7 facility, adding 4MW of critical power. The programme also includes the upgrade of the data centre's existing power infrastructure and the overall project is targeted for completion in first quarter of 2019.

2019 outlook

The international colocation providers continue to invest in Paris, with many offering powered shells or wholesale development to specification for the leading cloud service providers.

 

 

Germany, Frankfurt

Data centre market context

Frankfurt is one of Europe’s major financial centres and a hotspot for business and manufacturing. It is also home to the world’s fastest-growing interconnection market.

Germany holds some of the strictest data security protocols in Europe, well before the introduction of the General Data Protection Regulation (GDPR) throughout the European Union.

Planning permission remains a big obstacle for new data centre development in Frankfurt, with stringent controls for environmental issues (noise abatement measures, emissions, etc.), as well as energy-saving requirements. Fire safety regulations are also significant and applications or changes can take longer than expected to process.

Construction market conditions and publicly known projects

After a busy 2017, data centre construction market conditions in Frankfurt during 2018 remain hot. Much like London, most of the established operators are known to have had expansion projects and/or customer fit-outs in 2018: Colt, Digital Realty, Equinix, e-shelter, Global Switch and Interxion to name a few.

Tender prices are trending high, with an evident shortage of local contractors with data centre experience in Frankfurt. English and Irish contractors have established local businesses with mixed success and remain dependent on their limited number of German-speaking industry experts. They have to overcome the nuances of delivering projects in Germany, such as working to the VOB/B regulatory building framework.

Etix Everywhere, Luxembourg’s modular data centre specialist, is planning the first phase of a €120m investment on the outskirts of Frankfurt, to be launched in third quarter of 2019.

CyrusOne has announced the building of new data centres in both Frankfurt and London. Construction is set to be completed by the end of the fourth quarter of 2019 for the London III facility, while the Frankfurt III facility is scheduled to be completed in early 2020.

Construction has started on Global Switch’s second data centre in Frankfurt. The €115m facility – Frankfurt North – is adjacent to the firm’s existing Frankfurt South data centre, and will provide around 11,000 square metres of gross space.

2019 outlook

We are expecting 2019 to be another busy year of expansion projects for the established operators, and new powered shell developments for anyone able to secure the right land.

 

 

Ireland, Dublin

Data centre market context

With a combination of a cool climate, an English-speaking workforce, membership of the European Union and a low corporate tax rate, Ireland continues to be a major hotspot for foreign direct investment (FDI) in the technology industry. National inward investment body IDA Ireland published research this year, indicating that data centres have contributed €7.13bn to Ireland’s economy since 2010.

Dublin’s electrical grid and planning system have both come under enormous, well-documented pressure from the volume of hyperscale data centre project investment.

An Irish planning and legal review, driven by the Irish government, promises to provide increased surety of fewer obstacles to data centre development. The aim is to reduce time limits for planning applications and tighten rules on judicial review proceedings.

This initiative followed the scrapping of Apple’s €850m development in the west of the country, following three years of planning approval delays.

Microsoft has addressed limited power availability by constructing its own power station for its site in Clondalkin, consisting of sixteen gas-powered generators, and producing 18MW of energy.

Construction market conditions and publicly known projects

Data centre construction market conditions are hot and getting hotter, with self-build projects for leading cloud service providers Amazon, Google and Microsoft competing for contractors and resources with established colocation providers like Digital Realty and Equinix.

Then there are the new entrants to the market, such as CyrusOne and EdgeConneX (after a relatively short planning delay for its €400m Dublin data centre project) making recent headlines, and the continued clustering of data centres on the outskirts of the city.

2019 outlook

Major site acquisitions, large-scale planning applications granted and investment in fibre networks all contribute to a booming data centre market with tough competition for resources

The volume of work across Western Europe awarded to Irish contractors and subcontractors puts added pressure on the delivery of projects on “home ground”, with larger companies having to compete internally between projects for the most skilled workers.

The volume of work across Western Europe awarded to Irish contractors and subcontractors puts added pressure on the delivery of projects on “home ground”, with larger companies having to compete internally between projects for the most skilled workers.

 

 

Netherlands, Amsterdam

Data centre market context

Amsterdam promotes itself as a “smart city”, encouraging growth in the digital economy. Its low latency infrastructure, including the Amsterdam Internet Exchange (Amsterdam AMS-IX), provides the backbone for data centre operators across the Europe, the Middle East and Africa region.

A more recent trend – within the last five years – of the US technology companies building hyperscale facilities for their cloud service offerings, has benefited the Netherlands more than any other European Union nation. Large-scale campuses have been deployed stretching both north and east of Amsterdam as a result of this market development.

Construction market conditions and publicly known projects

Construction market conditions have moved from hot to overheated, due to the sheer volume of hyperscale development both underway and planned that stretch the capacity of the European supply chain.

Google recently captured a second plot of land outside Amsterdam, although it has not confirmed any data centre building plans for it. It is, however, in the process of spending a further €500m on expanding its existing mammoth data centre at Eemshaven.

The recently acquired Google land is close to where Microsoft located its second Greater Amsterdam campus.

General Data Protection Regulation (GDPR) and resulting data sovereignty demands have led to DataCentre Group (TDCG) acquiring two data centres from the Rabo Bouwfonds Communication Infrastructure Fund, to become the largest 100 percent Dutch data centre provider.

Most colocation providers are known to have expansion plans and/or new sites under development in 2018. Examples include Dutch-owned Interxion, EdgeConneX and Iron Mountain.

2019 outlook

2019 is set to be a record year for data centre construction in the Netherlands, driven by both hyperscale and colocation expansion projects, and combined with customer fit-outs of projects completed in 2018.

 

 

Poland, Warsaw

Data centre market context

Poland is the eighth largest economy in the European Union and the largest among the former Eastern Bloc members of the European Union. Many businesses use Poland as their base location to service Eastern Europe.

Data centre specific, Poland is the second largest market – after Russia – in Central and Eastern Europe, according to the findings of PMR Research. It is seen as a market undergoing a technology and industry evolution, with dynamic growth in high-end business services, research and development, financial technology and IT.

Construction market conditions and publicly known projects

A strong economic situation in the region has resulted in an interest in investment to update data infrastructure, though data centre construction activity remains cold in comparison to other markets.

The Equinix Internet Exchange (IX) is already available in Warsaw – as one of its 11 European locations – and colocation space is expected to be extended this year. OVH opened a new data centre in the market last year.

2019 outlook

There are no publicly listed major investments in the region, but with its low costs and skilled workforce it is a location firmly under consideration as a gateway to the East.

 

 

Spain, Madrid

Data centre market context

Historically, Spain has not been known as a thriving data centre market, though Madrid is considered an emerging market as businesses turn to outsourced cloud service provision.

As Spain's second largest industrial centre after Barcelona, Madrid hosts many forms of manufacturing, as well as being the centre of national government, finance and insurance.

Construction market conditions and publicly known projects

Data centre construction market conditions are considered warm with only a few publicly known construction projects in 2018. For example, Interxion invested €44m to construct its third data centre (MAD3) to open in second quarter of 2019.

Early this year, a 6,600km long submarine cable that was laid by Facebook, Microsoft and Telexius (a telecoms infrastructure company), connecting Bilbao and Virginia, came online. This is the highest capacity cable to extend across the Atlantic, and is further south of other similar routed cables, offering more protection from extreme weather conditions.

Furthermore, the Spanish and Brazilian governments have confirmed the development of Ellalink, a 9,200km submarine cable connecting data centres in Lisbon, Madrid and São Paulo. This project has been provided with additional funding of €25m from the European Commission, as part of the Building Europe Link to Latin America (BELLA) initiative. This cable should come online in 2020. And where there are new landed cables, there are usually new data centres.

2019 outlook

Investments in improved fibre connectivity and the general uptake of cloud service provisions are likely to drive investment in the years ahead.

 

 

Sweden, Stockholm

Data centre market context

The Swedish government recognised earlier than their neighbouring nations the potential of the data centre market. It positioned the country as an energy-efficient hub with Sweden's cool climate providing the potential to use free cooling at least 8-10 months of the year. This contributes significantly in reducing data centre energy consumption and keeping the supply green.

Stockholm is targeting being a carbon-neutral city by 2040 with more than half of the energy in Sweden generated through renewable sources.

The electricity tax levied on data centres has all but been removed. A 97 percent tax cut reduced overall electricity prices by around 40 percent for any existing or new data centre greater than 0.5MW, from January 2017.

Construction market conditions and publicly known projects

Data centre construction market conditions in Stockholm are considered warm but heating.

Consistent with the established European Union market, the colocation providers continue to expand. Both DigiPlex and Equinix were known to have active projects in 2018. While Interxion has confirmed €18m of capital expenditure to expand STO5 in two phases, to be completed in second quarter of 2019.

In the hyperscale arena, AWS, which opened an office in Stockholm last year, is expected to have multiple projects completed in 2018, to meet its publicly announced opening of a new cloud region.

2019 outlook

Facebook has confirmed it is looking to build a third 50,000 square metres data centre at its vast Lulea campus, nearly doubling its capacity.

Further hyperscale announcements in the region are anticipated in 2019, though whether these are self-built or leases on powered shells remains unknown.

 

 

Switzerland, Zurich

Data centre market context

With its well-functioning legal and political system and stringent data privacy laws, Switzerland is an extremely stable and neutral state. Its central European location and neutrality are key factors to its attractiveness to businesses looking to invest in the region, despite being recognised as one of the most expensive locations in the world to undertake construction projects.

Zurich is best known for its pharmaceuticals and financial services/banking segments, but it also has strong fibre connectivity and a robust electrical infrastructure to support development in the region.

Construction market conditions and publicly known projects

The data centre construction market in Zurich is considered as warm and heating up to investment.

Google Cloud Platform will soon launch a new region in Zurich – the sixth of its regions in Europe. The launch includes three separate zones to protect against service disruptions.

Microsoft Azure, as part of a 12-region worldwide expansion, will include two data centres in Switzerland – in Geneva and Zurich.

Interxion is to add 300 square metres of white space and 2MW of critical power at its ZUR1 facility. This €10m capital expenditure phase (ZUR1.6) is scheduled to come online in first quarter of 2019.

Web security services vendor Kapersky is due to launch a data centre facility in 2019 in Zurich in an attempt to address concerns relating to spying by the Russian state of its customers' data (a claim that is firmly denied by the vendor). This will entail all of the organisation’s data being moved out of Russia and into Switzerland, which is well-known for its stringent data privacy regulations (despite being outside the European Union and not directly affected by the General Data Protection Regulation (GDPR) regulations that apply there).

As an example of some of the colocation business generated by Zurich's financial services industry, Options, the provider of global market data and colocation services for trading firms, extended its services to the Equinix Zurich (ZH4) facility in 2018.

2019 outlook

The high cost of construction is likely to limit the size of data centre investment, though we do expect continued investment from data centre operators to host the provision of cloud service providers.

3 Middle East

UAE

Data centre market context

The UAE has long recognised the importance of diversification of its economy, with tourism being the key focus to date. The further diversification of sectors is set to mitigate the impact of reduced oil prices and a weakened global demand for trade in the area, assuring sustainable growth to the region over the coming years.

In 2013, His Highness Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the United Arab Emirates, and ruler of the Emirate of Dubai, announced the launch of the Dubai Smart City project, a commitment to transform Dubai into one of the world's smartest cities.

Construction market conditions and publicly known projects

The data centre construction market in the UAE is considered warm but heating up. Although the region boasts some of the cheapest labour in Europe, the Middle East and Africa, the availability of technically skilled labour poses a threat to growth when considering competing investments.

SAP, the German business software giant, has launched its first data centre in the UAE to provide cloud-based services to local companies. This is part of SAP’s US$200m development in the country.

Alibaba Cloud announced plans this year to build a further cloud facility in Dubai, as an extension of its collaboration with Khalifa University of Science and Technology.

Microsoft, as part of its 12-region worldwide expansion, is planning to launch two cloud regions in the UAE – one in Abu Dhabi and the other in Dubai.

Huawei has also just deployed a modular tier 3 data centre for Dubai Airports at Dubai International (DBX) to expand its reach across the Middle East, and boost the airport's private cloud capabilities.

2019 outlook

We expect the smart city initiative to drive increased capital investment from telecommunications companies.

4 Africa

Kenya, Nairobi

Data centre market context

Africa’s forecast for economic growth has been lower than initially expected due to the slower development of countries relying on natural resources, such as Angola and Nigeria. However, economic activity in areas not reliant on natural resources, such as Kenya, have remained strong.

The data centre industry is formalising on the African continent, with leading industry event providers Data Centre Dynamics and Data Economy each now hosting annual events there.

East Africa has been identified as a key growth region for data centres. Currently, there are five colocation data centres there, hosting 12 cloud service providers.

Construction market conditions and publicly known projects

The data centre design and construction industry is slowly maturing in Africa, though the market conditions are ranked as cold, but warming up in comparison to the other mature locations.

Africa Data Centres, a subsidiary of Liquid Telecom, fitted out a further floor in its facility in Nairobi this year. East Africa Data Centre (EADC) has added 500 square metres of white space, which will host a new analytics centre for Strathmore Business School, along with additional infrastructure.

Guy Willner, CEO of IXcellerate, describes Nairobi as the “London of Africa”, and is planning the “biggest data centre campus in East Africa”, said to be a US$100m project which will eventually have a capacity of 30-40MW in Nairobi.

As billions of dollars in capital investment are poured into Europe by the leading US cloud service providers, it is perhaps from the East that the first major data centre investment will reach East Africa. African presidents and heads of government attended the Forum on China-Africa Cooperation (FOCAC) in Beijing in September 2018. The African states are all hoping to get a share of the US$60bn for development projects that President Xi Jinping announced at the conference, which comes on top of billions previously pledged.

2019 outlook

With the ever-increasing demand for Internet usage on mobile devices – currently Kenya has 46 Internet users per 100 people – and the shift of enterprise to cloud services investment is flowing. We see East Africa as an emerging market in every sense. One to watch.

 

 

South Africa, Johannesburg

Data centre market context

The total GDP of South Africa is over US$315bn and the nation is home to over 50 million citizens, with a reported Internet literacy now at 52 percent and growing fast.

As such, South Africa’s data centre industry is thriving, with Johannesburg its single largest market by some margin – twice the size of Cape Town.

With several submarine cables interconnecting South Africa to Asia and Europe, Johannesburg has a connectivity ecosystem made up of 25 colocation data centres, hosting 304 cloud service providers.

Construction market conditions and publicly known projects

The data centre construction market in Johannesburg is warm with key projects coming to fruition and hyperscale investments increasing.

Microsoft announced this year that, as part of its 12-region worldwide expansion, two South African data centres (in Cape Town and Johannesburg) would be opened.

Amazon’s first CloudFront Edge location in Africa opened in Johannesburg in June 2018, with a further facility being opened in Cape Town in July.

Teraco Data Environments (Africa’s largest data centre operator) is planning a ZAR1bn (€73m) expansion to its three South African data centres. These existing facilities will be geared up to support more Chinese and Asia Pacific business, with China Telecom’s Middle East and Africa subsidiary establishing an interconnection network and telecoms hub to support growing data demand through Teraco's infrastructure.

The pull of Teraco is further illustrated by the infrastructure decision of South African ICT solutions provider and telco Vox. Vox is closing its Waverley, Johannesburg data centre, and instead moving into a hosted facility in the city run by Teraco.

2019 outlook

Construction spending has suffered due to negative investor sentiment and slow economic growth. But the government’s intention to invest in infrastructure should address some of the concerns associated with this.

The uncertainty over the nation’s presidency had unsettled confidence. The eventual resolution brings more certainty, but business is likely to remain watchful as the new president shapes policy.

 

 


This content is part of the Data centre cost index 2018

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