Record-breaking colocation take-up across Europe prompts renewed space availability concerns

The European colocation market is on course for another record-breaking year, according to predictions by real estate consultancy CBRE, but concerns persist about the long-term sustainability of its growth.

Demand for colocation capacity within the four major European datacentre hubs - Frankfurt, London, Amsterdam and Paris (FLAP) – is continuing to soar, as the hyperscale cloud and internet giants seek to build out their presence in these markets, and enterprises embrace colocation-focused hybrid IT setups.

However, the number of ideal sites within these locations where new datacentres can be built are in short supply, meaning operators are having to pay a premium to secure land where good connectivity and electricity supplies are abundant, said CBRE.

With the firm predicting the final quarter of 2019 will see the colocation sector enjoy “supercharged” growth, these pressures are likely to become more problematic for operators as time goes on, said Mitul Patel, head of datacentre research for Europe, Middle East and Africa (EMEA) at CBRE.

“These record levels of development underway in the major European markets are creating challenges,” he said.

“The effects of these barriers to entry are that datacentre developers are either choosing to locate in new, sometimes unproven, locations or are competing aggressively on price for land opportunities.”

Within the European market, the shortage of available sites is becoming particularly acute in Slough, which is considered part of the London colocation hub, and Schiphol in Amsterdam, Patel said.

As previously reported by Computer Weekly, the latter area has been subject to a ban on any new-build datacentres being constructed, due to concerns about how the continued demand for colocation capacity in Amsterdam is impacting on the National Grid.

According to CBRE’s third quarter FLAP colocation market tracker, there has been 38MW of datacentre capacity taken up across all four markets during July to September 2019, but – by the time the year is out – it is anticipated that take-up levels will exceed 200MW overall.

If that scenario does play out, it will be the first time since records began that full-year colocation capacity take-up has exceeded 200MW.

This record breaking year will be made possible by the fact that the amount of space taken up during the fourth quarter alone is expected by CBRE to be around the 70MW mark.

To accommodate all this demand, CBRE said an additional 150MW of new supply will come online during the final quarter of 2019, which will account for nearly 50% of all the new capacity that has emerged during the past 12 months.

Which will be music to the ears of both the cloud provider community and enterprises, said Patel.

“Despite cloud providers driving market activity, enterprise demand for colocation remains consistent across the major markets. CBRE analysis shows that in the four years from 2016, there has been an average of 43MW of enterprise take-up per year across the four FLAP markets,” he said.

“As enterprise companies continue to utilise colocation footprints as part of their hybrid IT architecture, we expect this to remain consistent.”