In particular, there’s an increased demand for strategically placed, large-scale data center campuses that can accommodate both the near-term and longer-term requirements of customers in these fast-growing sectors. A few years ago, conventional wisdom was that a small number of “FLAP+D” (Frankfurt, London, Amsterdam, Paris and Dublin) markets would be sufficient to serve the data center needs of all of Europe—but that’s no longer the case. The FLAP+D markets continue to be strategically important and are experiencing high growth with over 200MW of leasing in 2019. In fact, Frankfurt and London ranked among the top four markets globally last year. In addition to continued strong FLAP+D upsurge, there’s significant growth emerging across other data center markets throughout Europe.
Data center providers are moving quickly to establish hyperscale data center campuses to meet the exponential demand growth. Some end users may explore building their own data centers, while others may consider outsourcing to a data center partner, or a hybrid of both approaches. Regardless of the situation, there are certain factors that must be considered.
Emergence of “tier two” markets
The recent implementation of GDPR (European privacy laws), Brexit, and endemic demand for local infrastructure have driven end users (primarily enterprises) to require cloud service providers to have data centers in-country. For example, a cloud provider that serves businesses in Switzerland is likely to look for a data center within that country, as opposed to serving that requirement out of a facility based in Frankfurt or Amsterdam. This enables low latency, while keeping data, networks, servers and storage arrays within country boundaries. In addition to Zurich, emerging tier-two markets for data center operators in Europe include Milan, Madrid, Berlin, Warsaw and the Nordics.
The emergence of these tier-two markets outside of the traditional FLAP+D locations has resulted in a horse race between cloud service providers who are jockeying for position within these regions. Hyperscale data center operators with large amounts of land and power can facilitate the growth of cloud providers by enabling them to quickly establish new cloud availability zones, or regions, in these markets.
Challenges to market entry
There are substantial challenges related to securing space and building data centers quickly in both the FLAP+D and tier-two European markets. Constraints surrounding suitability of land, zoning, permitting and availability of power can slow the process significantly.
For instance, it can be difficult to obtain the necessary land and permits in a timely fashion. Land can be hard to come by, and it can take 6-12 months to receive the necessary permits, even if land is properly zoned. If land is not properly zoned, it could take 5-10 years to rezone, which takes those sites off the table.