The data center sector is one of the best protected in the current downturn. The fundamentals of being in lockdown at home, for both work and personal life, mean that this digital infrastructure is more crucial than ever. All of the applications and services provided by the cloud computing companies that we are using to function effectively during mandatory lockdown are ultimately powered by data centers, and therefore the role of the data center today is critical for all aspects of life. Data centers are the reason that we can have conference calls, shop online, stream television, play video games and connect with family and friends.

Q1 2020 was unusually quiet for cloud companies, who are responsible for 80 percent of take-up across the FLAP (Frankfurt, London, Amsterdam, Paris) markets. While the total take-up for Q1 was therefore relatively modest, at 26MW, there is no doubting the appetite of the cloud service providers for new data center infrastructure in Europe. The scale of their individual commitments is increasing and this is resulting in a growth in the number of single-tenant facilities. In the most active markets, London and Frankfurt, these companies are increasingly looking to lease whole buildings of over 20MW. As a result, the number of facilities leased entirely by single-tenants in 2020 is expected to reach nine, compared to four in 2019 and one in 2018.

New building is a challenge

On top of Q1 take-up, CBRE is aware of 138MW of further capacity that has already been committed to or is under option in the FLAP markets. These transactions, plus additional deals which come to market in the next three quarters, make it likely that the FLAP markets will reach 200MW for the second consecutive year.

Possibly one of the most significant challenges in the current environment involves the construction of new facilities and fit-out of data halls for new tenants. Market take-up is dependent of the development of these facilities to house new end-user requirements, so minimizing any delays to construction programs will be important to overall success.

As things stand, most companies are continuing with construction and plan to continue to do so as long as it is legal, practically possible and safe. Developer-operators are confident that delays will be minimized and that there will therefore not be a significant disruption to existing development pipelines.

The underlying drivers in the European data center sector are strong and the outlook is promising. Most economic indicators show that data center asset class is weathering the effects of Covid-19 well and we are confident the sector in Europe will continue to show strong growth in the coming 12-18 months

This article is based on CBRE's Q1 EMEA data centers report.