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1Q 2021 European Data Center Market Highlights

By Rhett Gill · 4/22/2021

Today, we will be discussing all of the major European data center market highlights for 1Q 2021. We’ll also briefly touch upon the condition of the market at the end of 2020 so that we can better understand how the previous year played a role in launching us into the position we find ourselves in today.

The European Data Center Market in 2020

2020 was a challenging year across various industries, the data center industry included. That being said, although 2020 was a year fraught with obstacles, it proved to be one of the strongest years that the data center industry has seen in recent memory - not only in terms of absorption but also in regards to the European data center market.

When speaking to operators, it seems like the legal process of closing such deals took much longer than anyone anticipated. That being said, when taking into account the deals that should have been closed in 2020 and will now be closed in 2021 (as well as the deals already scheduled to close in 2021), the year ahead is shaping up to be potentially as good as 2020.

Observable Challenges in Delivering Supply

In 2020, there were observable challenges in delivering supply not only to primary European data center markets such as Frankfurt, Amsterdam, or London, but also to secondary markets. In the face of these challenges, we even witnessed demand transfer to other markets because of the lack of supply. This is largely an issue of providers pre-leasing capacity before it has been built due to the desire to remain in key markets.

We have also observed development in tier 2 markets like Berlin and Zurich. These areas are not only taking capacity away from primary markets like Frankfurt but are also considered to be add-ons to those two markets. The power availability in some of the top European data center markets appears to be difficult to come by, as does the availability of appropriately priced land assets. This has resulted in developments outside of the traditional development zones.

Anticipated Next Markets

Another big trend that we’ve seen in the European data center market in 1Q 2021 is a dual strategy utilized by companies not only to lease large amounts of capacity but also to own and build it themselves. There has been an observable amount of anticipation surrounding where the next big markets will be located. In 1Q 2021, there seemed to be large amounts of speculation surrounding appropriate landmasses in tier 2 markets. Additionally, the competition for tier 2 markets seems to be potentially less than it is in tier 1 markets.

Overall, the growth of the tier 2 markets has been anticipated. At datacenterHawk, we’re interested to see how the absorption rate of European data center markets in 2021 will impact 2022, as well as whether or not that demand continues or simply levels off for a period of time.

Regulatory Environments in the European Data Center Market

In some countries within the European data center market, we’ve seen significant growth. In others, however, we have observed a slow down of sorts because of changes made related to power or, perhaps, data sovereignty. From the European perspective, there is a huge push to lessen carbon emissions and reduce the impact on climate change.

At the beginning of 2021, the data center industry in Europe announced a Climate-Neutral Data Center Pact that had both a number of the large operators and industry associations signing up. If you look to the commitment requirements of such a pact, there seems to be a preemptive move to avoid legislation from a government perspective. As an overarching dynamic, the pact has led to some interesting political and social impacts in locations such as France, the Netherlands, and Amsterdam.

Overall, the last year has increased the profile for the sector. People have been astoundingly grateful for digital infrastructure and its ability to allow society to push forward in the wake of a pandemic fairly unencumbered.

Looking Ahead

In taking all of the highlights of 1Q 2021 into account in terms of the European data center market, it’s clear that this is an exciting industry to be a part of. As the rest of the year moves forward, it will be enjoyable to watch what unfolds, particularly in the European data center market.

If you would like to dive deeper into 1Q 2021 North American and European data center data, click here to request access to Hawk Insight.

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