Despite the impact of a global pandemic, one of the main trends of 2020 has been the burst of investment outside the traditional FLAP markets (Frankfurt, London, Amsterdam, Paris) and Dublin.
Secondary markets like Warsaw, Madrid, Milan, Berlin, Zurich and Copenhagen are buzzing with site acquisition activity during 2020, and many of the traditional hyperscale customers are turning to the build-to-suit developers for a faster route to market as they expand their cloud regions.
Despite the investment in other locations, London, Frankfurt, Amsterdam and Dublin remain widely predicted to become ‘gigawatt’ markets by 2023 with live IT power exceeding 1,000MW.
During 2020 there has been a high number of new market entrants to Europe, primarily from the US and APAC. Standardization proves more difficult for data centre owners and developers in Europe particularly in comparison to the US, with currencies, languages and local regulations all creating extra workload while getting a new project or programme off the ground.
Generally, sites have remained open where possible during the COVID-19 pandemic, however productivity has suffered where markets are heavily reliant on labour travelling across borders from neighbouring countries.
Construction market conditions for data centre projects across Europe are warm to hot in almost all locations reported. This is driven partly by increased demand, but mostly by supply chain availability and capacity.
In London, demand for capacity remains high despite any political uncertainties. The major hyperscale players have almost all increased their commitment to the UK in the past year. Significant investments are being made even on challenging plots inside the M25 where both power and land itself are difficult to secure.
Across the water in Ireland, South-West Dublin continues to attract the largest concentration of data centres, although Amazon is notably investing in a new data centre development in Drogheda, County Meath.
Complementing the steady construction workload from existing data centre owners and operators including Microsoft, Google, Interxion (a Digital Realty Company) and Equinix, Ireland is welcoming the potential for data centre construction from newer entrants in the year ahead such as TikTok.
The Amsterdam metropolitan area reached an end to their pause in data centre construction, with the publication of plans for more controlled and sustainable growth this year. Global Switch continued its data centre development in this region, along with continued construction around its Paris and London facilities.
Spain has seen major investments from the likes of Amazon, with Madrid proving to be one of the fastest-growing markets this year. Also in Madrid, NTT began its first Spanish data centre this year.
Digital Realty and their subsidiary Interxion expanded at pace across Europe during 2020, with spends on both land and data centre buildings across many cities including Madrid, Frankfurt, Vienna and Paris. They also bought a provider in Croatia and reported their acquisition of a leading Greek data centre operator, Lamda Hellix.
The Frankfurt data centre market continues to be overheated. During 2020 Iron Mountain announced its formation of a 300M joint venture with AGC Equity Partners to design and deliver a 27MW data centre.
Vantage Data Centres also announced its acquisition of Luxembourg-based Etix Everywhere, including a major data centre campus already under development in the Offenbach area. Whilst Frankfurt remains the digital capital of Germany from a data centre construction perspective, Berlin is beginning to catch up.
The data centre market in Zurich has been thriving during 2020. Vantage Data Centers kicked off its major European expansion here, with construction ongoing on its new data centre campus in Winterthur.
This capacity adds to the growing market which includes a mix of global, European and local data centre providers such as Equinix, Colt, Interxion, NTT and Green Datacenter. This year Amazon also announced its upcoming infrastructure region in Switzerland, expected to open in 2022.
The Nordic region saw steady data centre investment, supported by a continued focus on renewable energy. European Energy announced approvals for the construction of a 300MW solar farm in the municipality of Aabernraa, Denmark, intended to provide power to data centres as well as a nearby substation.
Meanwhile, Facebook in Odense also put increased focus on expanding its capacity for recycling waste heat while continuing construction of new facilities.
Milan continues to increase in popularity as a strategic connection point. Amazon announced the launch of its Milan cloud region earlier this year, Equinix is building its fourth data centre in the market, and Vantage released its plans for a 64MW campus.
Vantage is also planning a state of the art 64MW campus in Warsaw, an increasingly hot location where Microsoft and Google have publicly announced investment plans for this cloud region.
Equinix opened its third data centre in the market earlier this year, while Global Compute Infrastructure announced its acquisition of ATM S.A., a data centre and communications business.
The workload pressure on hyperscale facilities is expected to be one of the biggest drivers of continued capacity demand in 2021 for Europe.
The hyperscale cloud providers account for a huge proportion of uptake, particularly in locations like Frankfurt where most of them are not actively building their own facilities yet.
2021 is expected to be a year of diverse activity across the region, with a mix of continued hyperscale self-build, build-to-suit deals, and colocation facility expansions or reconfigurations.
The trend for acquisitions and joint ventures is set to continue as all players in the market strive to get ahead of their competitors, seeking that critical headstart on securing land, power and permitting.
Many traditional financial services businesses have transitioned their interests into the prominent data centre sector, such as Goldman Sachs; whose Merchant Banking Division has teamed up with a management team to form Global Compute Infrastructure and announcing the acquisition of a Polish data centre business.
This trend is expected to continue in 2021 as investors look to diversify in an uncertain economic climate.
During 2021 there is expected to be continued demand on hyperscalers to expand further away from the traditional markets, getting ever closer to their customers.
Markets including Warsaw, Berlin, Milan, Madrid, Zurich and Vienna are predicted to benefit from this in the year ahead.
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