The European colocation market is in the middle of a purple patch, fuelled by the seemingly insatiable demand for datacentre capacity from both enterprise users and the hyperscale cloud and internet service provider (ISP) community.
According to CBRE’s latest quarterly colocation market tracker, which monitors the performance of the four main datacentre hubs of Frankfurt, London, Amsterdam and Paris (FLAP), Europe enjoyed another record year of take-up during 2018.
The amount of colocation capacity taken up across these four hubs hit 194MW by the end of 2018, equating to a total investment of £1.2bn. This beat the previous record of 155MW – achieved in 2016 – by quite some considerable margin.
For the London market, specifically, 2018 was a record year with 77MW of take-up recorded, marking the city out as the top-performing European colocation hub ever.
A deeper-dive into the CBRE data directly links the source of all this growth back to the hyperscale cloud giants, who were reportedly responsible for 79% of all of the space taken up across Europe during 2018.
European colocation growth explosion
“What’s happening at the moment, in the big markets where there is lots of sustainable demand, people are building like there is no tomorrow because there is such a high degree of confidence that there is going to be demand [in the future] from the hyperscalers,” CBRE executive director, Andrew Jay, tells Computer Weekly.
In any market enjoying a sustained period of growth, questions inevitably start to surface about how long the good times will last for, along with speculation about what might cause things to dampen down over time.
In this regard, the colocation market is no different. In November 2018, Jay presided over a panel session at the Datacenter Dynamics conference in London where he posed a couple of questions along these lines.
Specifically, he queried if the major European datacentre hubs have sufficient space and power to meet the growing needs of the hyperscale cloud giants in the long term.
Several months on, he remains of the view that power and space constraints could affect the market’s potential for future growth, but there is a little more to it all than that.
“The bigger issue is timing, and colocation providers being able to have sites that are available to provide the space the hyperscalers need, when they need it and in the right locations,” says Jay.
“There’s no problem actually finding sites and building datacentres if you have plenty of time to do it in and money is no object. Then you can find land, outbid other people for it and build datacentres on it.”
As such, it is not just a case of colocation firms having to find sufficient land to build wholesale datacentres on, but also having the ability to get power to the site in sufficient quantities quickly enough to accommodate the hyperscalers’ go-live date. This is as well as meeting any other demands they may have, which can be subject to change at a moment’s notice, according to Jay.
“It’s fast moving. One day, people might say, ‘We need 20MW in Frankfurt immediately or as fast as you can’, and that might suddenly change because the software developers or the networking teams at these companies change their requirements based on absolute end-user demand,” he says.
“The [hyperscalers are] developing these new applications and ways of delivering large amounts of data to us and to enterprises. And you can see why these things can change as quickly as they do.
“They can effectively change their minds and say, ‘That thing we said we needed in 12 months, we need in six, so we need to accelerate everything now’,” he adds.
From a space perspective, there should be plenty available to accommodate the needs of the hyperscalers within the main four colocation hubs for at least the next couple of years, he says, but – outside of these areas – the situation is harder to predict.
“The greater concern is the secondary markets – places like Madrid, Vienna, and Zurich, where it is newer demand that is coming through and so the developers haven’t got the past three years of [growth] statistics to help predict how the growth will pan out,” he says.
“They’re thinking, ‘Do I commit to the land? Do I not commit? Do I speculatively build this datacentre shell?’ in the hope the hyperscalers do actually come to the market and deploy as we think they’re going to.
“And that’s where there is a greater risk of there not being the space when it is required in the really big cities,” he adds.
Beyond the city limits
This is why it makes sense to start supporting the growth of secondary colocation hubs in the UK, so they are potentially poised to lighten some of the hyperscale load on London, says Jack Bedell-Pearce, managing director of colocation service provider 4D Data Centres.
“London is running out of space, and it is becoming more difficult to build very large hyperscale datacentres on a wholesale basis, but there is a lot of potential [for expansion] outside in the Home Counties,” he tells Computer Weekly.
“From a latency point of view, because we’re relatively close to central London, connectivity isn’t really an issue. From a labour perspective, it is actually an advantage because so many people who work in datacentres in London commute in from the Home Counties at the moment.”
The only potential sticking point with this plan is securing the planning permission needed to build new facilities out in these areas. Given the important role datacentres play in our increasingly digital economy, lowering the barriers to datacentre development should be a priority.
It is an area the Irish government has sought to address over the course of the past year by reworking its own planning laws to fast-track the creation of new datacentres by reclassifying the facilities as “strategic infrastructure developments”.
The measure was undertaken in the wake of the planning delays Apple ran into during its abortive three-year bid to build a datacentre in Athenry, on the west coast of Ireland.
“This is something the UK government has to get to grips with as there are still quite a few hurdles for companies like mine and others to overcome to build new datacentres,” adds Bedell-Pearce.
Andy Power, chief financial officer of colocation provider Digital Realty, says investing in their existing infrastructure and ensuring they are making the best use of the space they already have should also be a top priority for operators.
“In areas like London and Frankfurt where there’s limited space, our colocation datacentres in the city are within existing buildings we’ve upgraded to meet our commitments to sustainability, uptime, performance and scalability,” he told Computer Weekly.
In a similar vein, CBRE’s Jay says there is potential for datacentre operators in big cities to build up, rather than build out, to meet the demand for colocation capacity. Although it is not a model that is likely to work, from an economic standpoint, out of the capital.
“If you look at Singapore and Tokyo, there is a very tight amount of property available for any type of development, so people have to build up. The land is really expensive, so it is costly to build out – and the same is true of somewhere like Dockloads in London,” he says.
“At East India Dock, for example, there are no single storey datacentres at all – they’re all multi-storey datacentres because they have a constrained amount of land, but you’ve got a huge amount of demand in a tiny concentrated area where people want to be right on top of the internet exchange.”
Looking to the future, though, the challenge of securing sufficient space in the right location for a datacentre could become less of a direct concern for the colocation community, as Jay says there is an increasing appetite among the hyperscalers for building their own facilities.
“[Another] trend I think is really interesting is the hyperscale companies buying large tracks of land themselves so they can build campus-style datacentre capacity for the future,” he says.
“That suggests they are going to satisfy some of their future requirements on their own land rather than going to colocation. Because the overall requirements seem to be increasing significantly, so they’ll still take plenty of colocation space, but they will also take some campus-style, self-procured space,” he concludes.