Time and again the data center sector has proven its ability to perform during a crisis. It is true that as times get tough more businesses and consumers turn to online tools and services. Covid-19 has made the online world even more valuable. The internet has become a lifeline for many businesses, and an outlet for individuals forced to self-isolate at home.
While the data center industry can benefit from Covid-19, it is not immune to any impact. Providers have experienced the same restrictions as other businesses around the world: Their staff and customers on site face the same risks, and they are also part of wider supply chains, from those that deliver customers servers impacting demand and rollouts, to mechanical and equipment manufacturers reliant upon cross-border regional and inter-regional access.
Some projects pushed back
Through Q2, what we have essentially seen is the impact of Covid-19 on the industry. The figures for supply growth and take-up still look positive across the Frankfurt, London, Amsterdam and Paris markets (and interest is also growing across second-tier locations) but some projects have been pushed back. Lock-down has meant restrictions in some locations in the number of construction staff allowed on site, customer site visits (and prospective customer site visits – who signs a large deal without being able to visit a site?) as well as operational team access. The industry has done a stellar job at keeping the lights on but has felt some challenges around supply. We don’t foresee this being a long-term challenge. Indeed, most projects that were shifted were only pushed back by a quarter or two at most. It could, however, impact vacancy rates for the coming few months. And we are yet to see what impact this could, in turn, have on pricing.
At the same time, we have seen some very large deals, in many cases for complete wholesale facilities, being signed by the hyperscale cloud providers. Though in the same markets where demand appears to be incredibly high, such as London, we see some sites sit dormant – mostly those that are not fortunate enough to be located close to any of the hyperscale cloud availability zones. This could change, as cloud providers are also expanding their focus as they look to increase server capacity in all major markets.
Through Q2, we saw the carrier-neutral wholesale and retail colocation market across Europe grow to 1,735 MW of supply, up 19 percent on the same quarter last year. Only about 355MW of this is available today with the market ending Q2 with around 20.5 percent vacancy.
Our market view report - out this week - provides more detail around these figures and the trends that contribute to these during Q2. In September, we will also release our Premier Colocation Report for Q2, which will provide further detail on a market-by-market basis as well as an overview on how the investment community has helped propel the industry through Q2. Other events have also impacted the industry, such as M&A, the lifting of Amsterdam’s moratorium, and more – we go into a lot of the details around these events.
In the meantime, we will continue to monitor the market as it traverses through Covid. Nothing can be certain, so our predictions for this year are based around the notion that we will not see the major markets lock-down again. We can be confident, however, of the role the leased data center market is playing during the crisis and its ongoing importance for so many aspects of the society we find ourselves living in today.