The need for speed: COVID-19 exposes global competition for data centre capacity
Major global data centre markets are at risk of seeing demand eclipse supply, as COVID-19 impacts construction productivity and exposes the fragility of the global supply chain.
Our data centre cost index 2020 underlines the disruption wrought by the global pandemic, with 79 percent of respondents to an accompanying survey reporting that COVID-19 has decreased productivity and increased operating costs on data centre construction sites.
Our research analyses construction input costs – including labour and materials – across 40 key markets, alongside industry sentiment and insight from a survey to data centre professionals. This year, while Zurich remained on top at $11.40 per watt, second place was taken by Tokyo ($10.0 per watt), which leapfrogged Silicon Valley and New Jersey – now sharing third place at $9.80 per watt. In the US, Hyperscale growth continues to focus on lower priced markets such as North Virginia ($8.4/w), Texas ($7.7/w) and Arizona ($7.6/w).
London has seen a substantial increase in relative costs, rising three places in the rankings. It is now the fifth most expensive global market to build a data centre at $9.10 per watt, even with the ongoing Brexit uncertainty.
The other FLAP markets (Frankfurt, Amsterdam and Paris) remain just outside the top ten, but European investment in expanding beyond these traditional hotspots to secondary markets including Berlin, Warsaw, Milan, Madrid and Vienna. Auckland, Mexico City, Atlanta, Athens and Istanbul are also among the new entrants to the 2020 index, reflecting the rising appeal of secondary and emerging markets.
With data centres emerging as a priority market amid the global pandemic, 71 percent of survey respondents now consider it to be a recession proof industry – up from 50 percent last year. Data centre construction demand is slated to rise further next year, with 85 percent of those surveyed predicting higher demand in 2021. The challenge now is whether there is capacity in the industry to meet the pace of this demand.
68 percent now see the speed of delivering data centres as more important than build cost, with Hyperscale construction schedules needing to be reduced markedly from the current 15-18 month average to remain internationally competitive.
Key to accelerating delivery will be how the sector tackles the global skills shortage. 84 percent of survey respondents think that meeting data centre demand will require the rapid upskilling of local workforces around the world. This extends to the growing secondary regional markets and expanding cloud regions across Africa.
Dan Ayley, global head of hi-tech and manufacturing, said:
The events of 2020 have disrupted markets and industries all over the world, but demand for data centre capacity has remained on its steep upward trajectory.
"This is particularly true in fast-growing secondary markets in Europe and North America, but also across markets like India, Indonesia, Mexico and Brazil, which are emerging as new hotbeds of activity.
"Meeting this vast opportunity for expansion will mean guaranteeing quicker delivery of data centres in every region. Key to this is securing and bolstering supply chain capability – the pandemic has shown that we can no longer afford to rely on flying-in specialist expertise and a small pool of talent to service a huge global market.
Building future resilience rests on investing in regional training strategies, building local skills bases and boosting available capability on the ground in every market across the world.