Data centre demand set to rise even higher 

Confidence in the data centre industry is on the rise, according to the latest DC Radar report published by design and consultancy firm Arcadis. The annual survey of the owners, builders and occupiers of 2.1 million square meters of European technical real estate, conducted by the independent research company iXConsulting, revealed that 70% of respondents believe the next 12 months will see an increase in demand, with the majority (77%) of developer and investor responders having already expanded their portfolio of data centre stock in the last year.

It is expected that over the next five years the growth in demand for data centre services will be driven by IT and Cloud Service Providers. Over 70% of respondents identified this sector as their top ranked source of demand, well ahead of the next category of Banking & Financial Services, which was voted top by just 19% of those surveyed.

However, despite overall rising levels of confidence, there were concerns expressed over the industry's ability to continue to match supply with demand. Over half of respondents (55%) thought that a pinch point had developed in the design and build process with regard to sufficiently skilled professional contractor staff. Equally, a further (54%) agreed that predicted construction cost inflation of between 10-20% over the next three years will have a negative impact on development across Europe.

Respondents to the survey collectively operate across 28 European countries. While strong growth was recorded in the traditional centres of London, Paris, Frankfurt and Amsterdam, due primarily to their relative maturity, stability, advanced general infrastructure and strong fibre connectivity, there was also a growing interest in more secondary and tertiary centres. Significantly, almost 60% agreed that a rise in the cost of land and total build cost inflation would see demand shifting away from Tier 1 centres and towards new competitive locations. A number of Scandinavian countries – namely Finland, Sweden and Norway – proved particularly popular, with one quarter of respondents citing them as potential beneficiaries. Turkey was chosen as a favoured location by 15% of respondents, with Eastern European countries such as Bulgaria, Romania and the Czech Republic also proving relatively popular.

All of these newly emerging growth centres were cited as areas that could benefit from cheaper sources of renewable energy. This reflects the finding that the most important driver in the decision making process for choosing a new data centre is the availability, security and sustainability of power. Just over half (53%) of respondents ranked it as their number one factor, and around four-fifths placed it in one of the top two positions of importance, alongside cost of land and fibre connectivity. Furthermore, over 80% expect to see a rise in their data centre power consumption over the next three years, reiterating the need for more efficient power delivery and usage methods to ease the financial burden, along with adhering to the legislative and ethical requirement for greener energy.

Commenting on the findings, James Hart, Partner at Arcadis, said: “Improving economic conditions across Europe have underpinned the positive sentiment we’re seeing in the data centre industry. However, as a real estate asset they remain relatively difficult for any occupier to plan, build and operate. An ever-changing demand profile driven by new business practices and advancing technology means that self-management can be a continuous battle between CAPEX/OPEX and internal business demand, all of which makes out-sourcing an increasingly attractive solution. Indeed, nearly two-thirds of our respondents are actively using over 80% of their third-party managed technical space, compared to just 42% who maintain proportionate usage of their in-house assets.

“All of this underlines a drive towards ever-greater efficiencies, and we can expect the data centre industry to continue to adapt in terms of the way it operates – both from a technical and locational perspective. Equally the pressure on skills means that providers are having to re-evaluate their approach to supply chain engagement to secure the services of the leading consultants and suppliers.”