We also just released our 2Q 2021 Data Center Market Recap, which is our in-depth article about 2Q and includes more specific data and trends we saw in North American markets, as well as European and APAC.

Dan Scarbrough, datacenterHawk’s lead European & Asia Pacific analyst, joins us to talk about the state of European data center services in our recent podcast.

The Battle for Power

2Q has seen particularly strong growth in Europe. So much so that it has caused shortages in both power and appropriate buildings in many regions. There's a real thirst for new facilities that will support hyperscale operations. The big operators are quickly buying and establishing their sites, while new startups are in the process of clearing their planning and development phases so that they can make debuts later in 2021 with their offerings.

Power is one of the biggest challenges in markets such as Dublin, where legislation is being implemented in regards to how much minimum power needs to be offered to a company on a guaranteed basis. Often, new sites won't know what that guaranteed level of power is until well after they've broken ground on construction. There's been a similar lack of available power near Frankfurt as well.

Development, Land Speculation, and Permit Woes

In up-and-coming markets like Madrid and Milan, there's a lot of new development in the data center services industry. Raw land with available local power and resources is being acquired to serve the hyperscale demand in southern Europe. Spain and Italy have been a little slower on the move towards cloud service models, making the potential upside far greater in those regions.

Further north, places like Berlin that have never been primary data center markets are gathering a lot of interest from the key hyperscale players. Companies that are looking to mature their footprint in these smaller markets are particularly interested in local businesses and government. They are quite aware that General Data Protection Regulation standards create a demand for data center services within each country's borders.

In western Europe, permits for data center creation or modification can take upwards of a year, particularly if they involve drawing more power from the grid. This has even impacted the high-tech centers of London, which are rapidly reaching their listed capacity.

The demand for appropriate facilities is so high, there's been some amount of 'land banking' going on, where the big colocation operators will buy development properties in secondary, and even tertiary markets. Some don’t even have a short-term strategy for utilization. They're just trying to get ahead of the curve for future hyperscale demand and are willing to develop appropriate facilities based strictly on forecasting data.

Because of the importance of getting the right land to build and operate these data center services, even companies who are currently leasing are looking to move into lease-to-own or pure ownership positions soon. One of the main value drivers for bigger clients is flexibility, which is reflected by their desire to partner with data centers that can offer them ownership opportunities.

A Glimpse into the Asia Pacific Region

datacenterHawk has recently opened operations in the Asia Pacific region, collecting data for our Insight market reporting platform. The way that data center services are offered in various markets differs quite a bit from North America and Europe, particularly in places like Singapore, Hong Kong, and Sydney.

Hong Kong is dominated by just a couple of very significant players. Volume has been holding steady over the past few years, without a lot of the dramatic growth seen elsewhere in the world. Some of that can be attributed to the privacy rules that they need to abide by according to the Chinese government, which has made outside investors more reluctant. But facilities are still being used as a landing point for Chinese operators who wish to expand into the rest of Asia.

Singapore is quite a different picture; the desire for investment is there, but the opportunity is lacking. There's been a moratorium on new builds, and they're quite focused on green energy and smarter designs for data center services operations. There's not a huge amount of capacity available now. For any construction that wasn't nearly completed before the pandemic hit, there will continue to be significant delays across the board.

Sydney's development is more robust, and the market is far more open. Regulation is present but more reasonable than a lot of other APAC regions. The big Sydney operators are starting to push into Australia’s secondary markets such as Melbourne and Canberra. Because of Singapore's availability and new build issues, many companies are opting for investment and data center presence in Sydney, either in the short or the long term.

The Asia hyperscale market is in its infancy, particularly when compared to North America and Europe. There's a lot of room for growth. Countries such as India might be in the best position to take advantage of that capacity and quality gap since data center services operations in many regions already have established partnerships with experienced counterparts in both Europe and North America.

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datacenterHawk offers direct access to both established and emerging market data via our insight platform. Power, vacancy, pricing, trends, and major provider activity are all tracked. The brand new Hong Kong, Singapore, and Sydney regions are all available in the ‘All Markets’ section at the top of the insight reports page.