Hyperscaler demand for European datacentre space takes colocation market to new record highs

The amount of colocation space being consumed by the hyperscale cloud giants in Europe is on course to drastically increase before the end of the year, predicts real estate consultancy CBRE.

The organisation’s latest quarterly colocation market tracker report states the hyperscalers are ramping up how much space they are willing to take on within the major European datacentre hubs of Frankfurt, London, Amsterdam and Paris (FLAP), as the demand for cloud services across the continent continues to grow.

“A significant trend in the four major FLAP markets is an increase in commitment sizes by hyperscale cloud companies,” the document states.

While the hyperscalers have previously been content to expand “2-3MW” at a time, they are now looking to build out their capacity at a much faster rate, the report continues. “Indeed, we expect to see double-digit transactions in the FLAP markets before the year is out,” it adds.

In the first half of 2018 alone, 87MW of datacentre capacity was taken up across all four cities, which marks another record quarter for the colocation industry, CBRE’s data shows.

“London and Frankfurt were responsible for over 30MW of take-up each in H1 2018 as cloud companies again dominated activity in the European markets,” it reads.

The hyperscale cloud giants, which include the likes of Amazon Web Services (AWS), Microsoft, Google and Facebook, are regularly credited by analysts for being the major driving force behind how much growth the colocation market has seen in recent years.

However, as the CBRE report alludes to, there are concerns over how long this trend is likely to continue for, with some operators fearing the hyperscalers might – once they reach a critical mass – start building their own facilities in these regions instead.

“The question of whether the hyperscalers will continue to procure this sustained level of colocation capacity over the medium-term or build their own campuses will determine the success of these colocation markets,” the report states.

For the time-being, the colocation market is continuing to bring more capacity online, in response to the appetite shown by the hyperscalers, with CBRE’s figures suggesting 95MW of new supply has become available during the first six months of 2018 alone. It is also forecasting that a further 82MW will be added to the supply pipeline by the end of the year.

Mitul Patel, head of Europe, Middle East and Africa (EMEA) datacentre research at CBRE, said the continued buoyancy of the colocation market means it remains an area of keen investor interest.

“Investors continue to be drawn to the data centre asset class because of the incredible growth of the European market. As opportunities for M&A are scarce, investors are utilising more creative means to deploy capital in the sector and development finance is one avenue open to them,” he said.

“Society’s reliance on digital devices and cloud services, and consequent need for data storage and processing, will only increase as the world gets smarter and more connected.” 

“CBRE’s Portfolio 2040 research estimates suggest the amount of data that internet of things devices generate each day is doubling every 40 weeks; the effects of this are very evident in data centre activity in Europe,” said Patel.