The Jones Lang LaSalle Data Centre Barometer Autumn 2011 Issue 7

Transcription

1 Data Centre Barometer - Autumn 2011 The Jones Lang LaSalle Data Centre Barometer Autumn 2011 Issue 7 Despite increased economic uncertainty, survey respondents appear to maintain a generally positive feel regarding the supply and demand balance of the European data centre market. Almost half of respondents are expecting to expand the size of their in-house technical floorspace portfolio over the coming year, a proportion unchanged since the last survey, whilst there has been a marginal increase in those expecting to increase their third party operated data centre stock. Almost two thirds of respondents would consider a modular solution for their next data centre; this proportion has now doubled, reflecting the attractiveness of this type of approach. Around half of respondents believe that the cost of occupying data centre floorspace will increase during the first half of 2012, a fall on the 70% noted in our last survey.

2 2 On Point Data Centre Barometer Autumn 2011 The Jones Lang LaSalle Data Centre Barometer Welcome to the seventh Jones Lang LaSalle Data Centre Barometer Survey. As with previous editions, the report comprises an independent market survey of the European data centre industry, undertaken by ix Consulting, the specialist data centre consultancy. What is your primary relationship with the data centre industry? 13% 42% Colcation operator 15% Carrier / Integrator / Web hoster Corporate occupier Real estate developer/investor 30% The survey was undertaken in September 2011, when the implications of the eurozone debt crisis were becoming evident but the solutions to assist those countries struggling under austerity plans, were far from clear. Understandably, the opinions expressed by the respondents in reflect this uncertainty. Despite this, the overall message appears still to be one of wait and see rather than anything more worrying - similar to our previous issue - and encouraging under the circumstances. In the meantime it is business as usual and to the best of our knowledge - unlike planned investment in new data centre sites or significant IT projects, have not yet been cancelled. It is too early to predict whether, in the longer term, the turmoil in the eurozone will result in companies cutting IT budgets and hence a reduction demand, but the survey indicates that whilst half of the respondents do not intend to expand, there is a significant number expected to expand in the second half of With the relatively limited development of new sites of the last four years, unsurprisingly, the largest group stating that they intended to expand were the providers. What is encouraging is that the corporate sector, albeit only a quarter of the respondents, intended to expand and few predicted downsizing. As you would expect from a market that has witnessed steady growth, the response to the questions has not significantly varied from the last survey but there are a number of opinions which warrant further investigation, in particular on the question of the use of containerised solutions. Six months ago we found that onein-three respondents would consider this procurement route, this proportion has now doubled. In addition, the proportion of those who were undecided has reduced to one-in-five, with a corresponding increase in those agreeing. This is reflected in our conversations with end users who are attracted by the speed to market, scalability and flexibility of the modular approach. This does not mean that the traditional build will no longer be applicable, but more a reflection of the fact that modularity is now a deliverable product and can provide a just-in-time solution for those companies with tight time constraints. For some time we have been monitoring trends in respect of locations. In it is apparent that not only will the respondents increasingly consider locations 200km away from their main IT hub but also a greater willingness to consider alternative countries in Europe if there were significant cost advantages; notably with considerable support from the corporate sector. This is still evident, but in the main groups that are taking advantage of cost reductions through geographical strategies are the significant global companies such as Facebook, Microsoft and Google, where size is important. In our experience, amongst the typical occupier, be it in London, Amsterdam or Paris, sites tend to be no further that 40kms from existing IT hubs. In our last edition, our conclusion was that a status quo remained within the market and to some extent this is also still the current situation. Over the course of 2011 we have been tracking a number of providers of technical space, and most had expressed a desire to procure further real estate driven by existing sites reaching capacity, within months, robust order books and pipeline demand. What has been encouraging is that a number of these providers have secured new product during the course of the last quarter and this is spread across EMEA, not just in the traditional Tier 1 cities, providing evidence that despite the economic troubles, the sector appears more robust than in 2009, and has the confidence to invest in the future. David Willcocks Lead Director Data Centre Solutions

3 On Point Data Centre Barometer Autumn Index Barometer Dynamics 4 Respondent Analysis 7 Respondent Profile 8 Data Centre Opinions 12 Letter from America 15 Data Centre Opportunities 20 Contacts 22

4 4 On Point Data Centre Barometer Autumn 2011 Barometer Dynamics The seventh Jones Lang LaSalle Data Centre Barometer survey ( Autumn 2011) provides the latest insight into the occupational, development and investment markets of the European data centre industry. Independent data centre consultancy, ix Consulting, have gathered and analysed survey responses from real estate developers and investors, corporate occupiers, colocation providers and IT and telecom service providers from across Europe. In total, responses were received from companies who controlled combined data centre portfolios of around 14.1 million sq ft of technical floor space; a small increase on our preceding survey published in May survey began, with the average view now suggesting a market whose balance between demand and supply has moved in favour of the occupier. Conversely, amongst our IT service providers, hosting and colocation operators, the prevailing view appears to be contrary to our occupier respondents, reflecting a market where demand is continuing to increase as supply diminishes and thus remaining marginally in their favour. Data Centre Barometer - Change over time Demand for space heavily outweighs the current supply of appropriately fitted space Identified demand is increasing as the supply of appropriately fitted space is diminishing Demand for space matches current supply of appropriately fitted space Total technical floorspace portfolio size of DCB respondents 15 Supply of appropriately fitted space is increasing as occupier demand reduces Supply of appropriately fitted space heavily outweighs occupier demand DCB1 Mar 2009 DCB 2 Sep 2009 DCB 3 Jan 2010 DCB4 May 2010 DCB 5 Nov 2010 DCB 6 May 2011 DCB 7 Nov 2011 million sq ft DCB1 Mar 2009 DCB2 Sep 2009 DCB3 Jan 2010 DCB4 May 2010 DCB5 Nov 2010 May 2011 Nov 2011 Carrier, Integrator and Colocation Market Sentiment Corporate occupiers Developers / Investors The proportion of respondents who indicated that they have increased their in-house managed data centre capacity over the past six months has risen to around 60%; an uplift on the 50% recorded in the preceding six month period. The Barometer Over the six months since the last survey ( - May 2011), overall sentiment, with regard to prospects for the European economy, have worsened. Despite this, respondents in our latest survey still appear to maintain a generally positive feel regarding the supply and demand balance of the European data centre market; albeit this sentiment remains tempered by a generally cautious attitude. Developers and investors of data centre real estate remain the most optimistic of our groups of respondents. Indeed, the downward trend in sentiment that had been recorded earlier in the year amongst this group appears to have ceased, with levels of optimism remaining broadly similar to those recorded six months ago. The latest survey provides further evidence that corporate occupiers have seen the largest shift in sentiment since our Almost half of those who replied to our survey are expecting to expand the size of their in-house technical floorspace portfolio over the coming 12 month period, a proportion unchanged since the last survey and a sign that the technical real estate market remains broadly optimistic. The proportion of respondents who indicated that they would reduce their in-house data centre space remains small, standing at approximately one in twenty. The number of respondents who are undecided on what they will do with regard to their in-house data centre estate has risen for the second successive survey, a reflection of an increased level of uncertainty over economic prospects amongst this group. There remains a significant proportion of respondents who believe that there will be no change in the amount of their in-house data centre space over the next 12 months, albeit this proportion has fallen over the past six months, again a reflection of uncertain economic prospects.

5 On Point Data Centre Barometer Autumn Perhaps unsurprisingly, colocation/it providers and carriers remain the most optimistic group amongst our respondents with around 55% expecting to expand their in-house portfolio over the next 12 months reflecting their pressures to think ahead for future growth opportunities. What are your current expectations for changes to your in-house technical data centre area over the coming 12 months 100% What are your current expectations for changes to your third party technical data centre area over the coming 12 months 100% 80% 60% 40% 20% 80% 0% DCB1 Mar 2009 DCB2 Sep 2009 DCB3 Jan 2010 DCB4 May 2010 DCB5 Nov 2010 May 2011 Nov % Expand Remain same Downsize Undecided 40% 20% Drivers of change in data centre footprint 0% DCB1 Mar 2009 DCB2 Sep 2009 DCB3 Jan 2010 DCB4 May 2010 DCB5 Nov 2010 May 2011 Nov 2011 Drivers of in-house changes Expand Remain same Downsize Undecided 70% 60% Results from the latest survey provide more optimistic news for third party providers of technical real estate, with one-insix expecting to expand their outsourced data centre stock, an improvement on the one in ten recorded in the Spring 2011 survey, and the highest recorded figure since May Despite this recent improvement, sentiment with regard to expansion of third party managed data centre space, remains less optimistic than in-house expansion in our latest survey, and is still below the long term trend recorded since the start of the DCB in March % 40% 30% 20% 10% 0% DCB1 Mar 2009 DCB2 Sep 2009 DCB3 Jan 2010 DCB4 May 2010 Corporate expansion or contraction Changing power demands and/or costs Changes in available IT budgets Regulatory or legislative drivers Availability of the right data centre product DCB5 Nov 2010 May 2011 Nov 2011 Encouragingly, the number of respondents who indicated that they would be reducing the size of their third party managed data centre estate remains unchanged at around one in ten. Around half of respondents indicated that they will keep the size of their externally managed data centre space unchanged over the coming 12 months. Uncertainty in the European economic landscape appears to be hampering the data centre occupational plans of respondents, with an increasing proportion remaining undecided as to how their externally managed stock would change over the course of the next 12 months. For the seventh successive survey, corporate expansion or contraction remains the single most important driver of change for the decision-making process with regard to changes in the volume of data centre space amongst our respondents. Over the past six months, changes in available IT budgets appear to have become more important as a driver for both internally managed and outsourced technical real estate, with over one in five now ranking it as important; double the number of those who mentioned it last time.

6 6 On Point Data Centre Barometer Autumn 2011 Drivers of third party changes 60% 50% 40% 30% 20% 10% 0% DCB1 Mar 2009 DCB2 Sep 2009 DCB3 Jan 2010 DCB4 May 2010 Corporate expansion or contraction Changing power demands and/or costs Changes in available IT budgets Regulatory or legislative drivers Availability of the right data centre product DCB5 Nov 2010 May 2011 Nov 2011 Once again, changing power demands remains surprisingly low on respondents lists of drivers, both with regard to internally and externally managed space. This survey has seen the availability of the appropriate product diminish significantly in importance to respondents with regard to both in-house and outsourced data centre space with less than one-in-ten of respondents now citing it as important. Developers Criteria Developer s market sentiment is gauged through the proportion of risk that they feel able to support by way of pre-letting before starting a scheme. Our latest survey shows an increase in the average amount of space that a developer or investor requires to be pre-let before they would begin to build out a scheme. Having stated that, in the last quarter, a number of real estate developers have secured new sites and have stated that their intention is to develop a powered shell. The average level of pre-let required now sits at its highest level since the survey began, and indicates an increasing reluctance for speculative building in the European data centre industry. If it is your intention to develop more technical space during the next 12 months, on what basis will that be? % secured pre-let required DCB1 Mar 2009 DCB2 Sep 2009 DCB3 Jan 2010 DCB4 May 2010 DCB5 Nov 2010 May 2011 Nov 2011 Despite this rise in the proportion required, the number of respondents demanding a total pre-let in order to start build-out has decreased to fewer than one in five, whilst the majority stated that they required over 75% let in order to start a development. Unsurprisingly, for the third survey in a row, no developer recorded that they would build out data centre space on purely a speculative basis, albeit market evidence suggest that a number are prepared to build partially on this basis on parts of their scheme. If it is your intention to develop more technical space during the next 12 months, on what basis will that be? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% DCB1 Mar 2009 DCB2 Sep 2009 DCB3 Jan 2010 DCB4 May 2010 DCB5 Nov 2010 May % pre-let 75%-100% pre-let 50%-75% pre-let Source: The Jones Lang 25%-50% LaSalle pre-let Data Centre 5%-25% Barometer pre-let Autumn % spec Nov 2011

7 On Point Data Centre Barometer Autumn Respondent Analysis 1. What best describes your view of the European data centre market at present? At the core of our survey is the Data Centre Barometer which is designed to reflect the changing attitude and sentiment of those investors, developers, advisors, service providers and corporate users of data centre space across Europe. It captures the current thinking of those participants on the running state of the market, as well as providing insight into the short to medium term prospects of the industry. The position of the barometer needle for each participant grouping reflects the overall view of that particular group of respondents. Whilst there are participants within each group whose views may vary significantly from this mean, it is the movement in the mean position over time (and relative to other groups) that provides the most interesting base from which to analyse the health of the industry. The latest survey suggests that the majority of those involved still maintain an overall positive view with regard to future prospects for Data Centre Barometer the European data centre market, albeit there are signs of a greater degree of uncertainty than has been the case in previous surveys. For instance, just over a fifth indicated that they believed supply was outstripping occupier demand to some degree; contrasted with just under a fifth in our last survey in Spring. However, around two fifths of those who replied believe that occupier demand is on the rise with supply of the appropriate stock becoming more constricted. In Spring 2011, we questioned whether we had seen a bottoming out in sentiment. The latest findings suggest that we may not have reached that bottom yet, but with a back-drop of a summer period which saw a major fall in confidence within the European community, this is not unexpected. Indeed, the changes in sentiment we have monitored are incremental with both positive and negative changes being fairly narrow in range. Given the still-uncertain economic conditions and financial austerity that persist, we may well have been justified in expecting a more pronounced overall downturn in sentiment. Given that this has not been the case, it would seem that there is a degree of robustness that continues to characterise the European data centre market. Whilst it would be wrong to suggest that it is to any degree ring fenced from the economic travails currently Demand for space matches current supply of appropriately fitted space Corporate Occupiers Carrier, Integrator and Colocation Supply of appropriately fitted space is increasing as occupier demand reduces Identified demand is increasing as the supply of appropriately fitted space is diminishing Developers/Investors Supply of appropriately fitted space heavily outweighs occupier demand Demand for space heavily outweighs the current supply of appropriately fitted space

8 8 On Point Data Centre Barometer Autumn 2011 impacting the global economy, it could be inferred that the demand and supply equation that dominates the health of any investment market may well be standing up to the challenge of the current world economic difficulties. On a sectoral basis developers and investors remain the most positive, with almost all of them reporting that they believed demand outweighed the current supply of appropriately fitted space, representing an increase on the four fifths that expressed the same sentiment in our Spring 2011 survey. Amongst our colocation/it provider and carrier respondents, positive sentiment appears to have remained relatively static during the course of 2011, with just over two thirds still believing that there is a lack of supply of appropriately fitted stock, whilst one-in-two believes that demand matches supply. In addition, there has been a marginal decline in those retaining the view that supply of space is on the increase against a background of diminishing demand. For the second successive survey, the most significant shift was recorded amongst our corporate respondents. Although not as pronounced as was seen in our last survey, there appears to be a greater degree of polarisation amongst the corporate respondents. Previously we had noted that these respondents had gradually moved towards a more neutral position reflecting a view that demand is more closely aligned to actual supply, from one of a perception that demand was outweighing supply. The latest evidence now suggests that corporates believe that the market has shifted slightly further in favour of the tenant, with supply starting to exceed demand. This shift now sees nearly 50% of respondents believing that supply outweighs demand to some extent, countered by an increase in the number at the other end of our spectrum who believe demand is now firmly outstripping supply. In comparison to our previous survey, it appears now that the majority of our respondents believe that a wellbalanced demand/supply equation is over, although don t appear to agree on which way the balance has tipped. Respondent Profile 2. What proportion of your total European data centre capacity is based in-house or with a third party? Whilst colocation operators and IT integrators/web hosting respondents continue to favour running their own data centre space, there has been a decrease of those recording that 80% or more of their data centre portfolio was internally managed; from 70% to 65%. It may be that we are continuing to see a trend of respondents taking third party managed space as a result of the on-going lack of capital to build facilities or take on new developments, allied to the time pressures of bringing new schemes to market when there is immediate demand from clients. In addition, shorter term contracts from clients may not provide sufficient initial demand to contract to build out larger facilities, with suppliers of externally managed space offering the solutions to satisfying these client demands. It appears that our corporate respondents find the attraction of managing the majority of their data centre footprint less attractive than in our last survey, with a recorded drop from 85% to 60% of them who are managing 70% or more of their portfolio in-house, now in line with the proportion identified this time last year. The lack of in-house skills for building and maintaining stock, along with concerns with the lack of capital may all be a contributing factor in this. 3. How much of your current in-house data centre space are you actively using? How much of your current in-house data centre space are you actively using? 40% 35% 30% 25% 20% 15% 10% 5% 0% 80% - 100% 60% - 80% 40% - 60% 20% - 40% Less than 20% Long term average

9 On Point Data Centre Barometer Autumn One of the most marked changes recorded in our Spring 2011 survey was that a higher proportion of respondents reported a comparative increase in the use of their in-house data centre space; some two fifths reported using over 80% of their technical footprint. This level remains the same in our latest survey, standing just above the long term average recorded since DCB1. As you would expect, the proportion of respondents who utilise 40% or less of their in-house facilities remains relatively low at around one in four, as companies continue their attempts to maximise the economies of using existing facilities where possible. In particular, the average utilisation rate of our corporate respondents has risen from around 75% to just over 80%, as the desire for an even greater degree of efficient use of existing resources continues to prove an important spur. Similarly, amongst our colocation operators and IT integrators/web hosters, the average utilisation rate has also risen to 70% of their total space. 4. How has your total in-house fitted technical floor space altered over the last six months? The proportion of respondents who indicated that they have increased their in-house managed data centre capacity over the past six months has risen to around 60%; an uplift on the 50% recorded in the preceding six month period. Importantly, whilst there has been this increase, the degree of expansion has dropped, with just 20% reporting an increase of at least a fifth in their in-house data centre stock this time around 50% less than in Spring There has been a decline in the proportion reporting a reduction in their in-house technical floorspace - fewer than one-in-twenty currently indicated that this had been the case this time around - whilst the numbers reporting no change fell from 45% to below 40%. How has your total in-house fitted technical floor space altered over the last six months? Unchanged < 10% 5. What are you current expectations for changes to your inhouse technical data centre area? The results of our latest survey suggest that there is likely to be no diminishing level of demand for in-house space over the coming year, although notably over a quarter of respondents remain undecided as to what they will do in the second half of The proportion of respondents who suggest that they now expect to expand their internal technical floorspace sometime during the coming 12 months has remained constant at around half since the last survey. The results suggest that a significantly higher proportion of those who replied expect expansion will take place in the second half of 2012 rather than in the first half. For the third survey in a row, the proportion of those expecting to downsize their in-house technical floor space over the period remains low at around one in twenty. What are your current expectations for changes to your in-house technical data centre area? 60% 50% 40% 30% 20% 10% 0% Downsize Remain same Expand First half 2012 Second half 2012 Undecided Colocation/IT providers and carriers remain the most optimistic group amongst our respondents with around 55% expecting to expand their in-house portfolio over the next 12 months; a marginal decrease on our last survey and undoubtedly reflecting their pressures to think ahead for future growth opportunities. 10%-20% 20%-50% 50%-100% > 100% Expanded Reduced Corporate respondents appear to remain the most circumspect group, with less than a quarter predicting expansion of their in-house portfolio over the next 12 months. For this group of respondents, however, it is arguably more difficult to predict future IT demand, linked as it is to the vagaries of their individual business markets. Conversely, colocation/it providers and carriers whose business is data centres, should have a clearer medium and long-term view on their occupational profiles.

10 10 On Point Data Centre Barometer Autumn What factors are driving these changes to in-house technical data centre area? For the seventh successive survey, our respondents have identified corporate expansion or contraction as the single most important factor driving changes to in-house floorspace over the coming 12 months. Well over half of those who replied cited this as the case with little discernable difference in the proportion when responses are contrasted over the first and second halves of the year. One notable shift in this survey, from its predecessor in Spring, is that those who have identified changes in available IT budgets as an important factor has increased, with over one in five of those surveyed now ranking it as important. This would suggest that respondents are increasingly aware of ongoing economic uncertainties and the potential pressure that may be placed on enterprise IT budgets as the European crisis continues to play out. Interestingly, the availability of the right data centre product a factor which had been cited by nearly a fifth of respondents in the preceding survey has now been identified by less than one-in-ten, suggesting few believe any potential shortage or over-supply will impact on the decision making process. externally managed space as efficiently and effectively as possible, whilst also retaining expansion opportunity for clients with immediate requirements. For the second successive survey around seven out of ten respondents have seen no alteration in the volume of outsourced technical floorspace over the last half year period. Similarly - and again for the second survey in a row - around a fifth of respondents have expanded their externally managed space. In contrast there has been a marginal increase in the proportion of those reporting a reduction in their holding, suggesting that a significant number have adopted a wait and see attitude over the past year or so. Amongst our colocation and IT integrator/host respondents, two thirds reported unchanged portfolios over the past six months; a continuation of the cautious outlook adopted by those from this sector identified in our last survey. Although market evidence suggests that a number of the major hosters have been particularly active in acquiring new space whilst integrators on the whole have been more cautious in their approach. 8. What are you current expectations for changes to your third party technical data centre floorspace? What factors are driving these changes to in-house technical data centre area? Availability of the 'right' data centre product Regulatory or legislative drivers Changes in available IT budgets Changing power demands and/or costs Corporate expansion or contraction 0% 10% 20% 30% 40% 50% 60% First half 2012 Second half Has your total third party fitted technical floorspace altered over the last six months? The proportion of respondents who indicated that they were actively using over 80% of their technical data centre space managed by a third party stands at around two thirds, a proportion that has remained largely un-changed for the third successive survey. Amongst our service providers respondents, this proportion increases to around 70% reflecting their ongoing need to use Although the caution noted over the last year or so remains prevalent amongst our respondents with regards to their expansion of externally managed technical space, the latest survey provides some evidence of a possible renewed interest in expanding third party operated data centre stock. Whilst in Spring this year one-inten respondents stated that they expected to expand their third party managed technical space over the coming 12 months, our latest survey sees this proportion rise to one in six. In contrast, the latest survey has seen a marginal increase in the number of respondents who said they will look to reduce their exposure to third party providers of data centres; from around 8% in the Spring 2011 survey to 10% this time around. The majority view however, is still that respondent s externally managed portfolio s of technical space will remain unchanged; with half of respondents reporting this, albeit a fall from 60% six months ago. There are some changes in these expectations over the two different periods of question; first half and second half of Of those expecting to decrease their third party technical floorpsace, three quarters expect to do so during the first six months of the year with a far smaller proportion planning to do so in the second half.

11 On Point Data Centre Barometer Autumn In contrast, of those planning to expand the proportion remains constant across both halves of One other point of note is that a significant number, around two-in-five, indicated that they are undecided, a feature prevalent from Summer 2012 onwards. What are your current expectations for changes to your third party technical data centre floorspace? 70% 60% 50% 40% 30% 20% 10% 0% Downsize Remain same Expand First half 2012 Second half 2012 Undecided 9. What is the current average power density (in kw) drawn (not including cooling) in your data centre(s)? Respondents were asked to provide a measure of current average power density drawn across their entire data centre portfolio excluding cooling. The average amount of declared drawn power for those respondents with an in-house managed facility has increased over the past six months from 2.1 kw per sq m to just over 2.3 kw per sq m. This increase is in line with the results of our last survey where respondents expected average power demands of 2.3 kw per sq m over the course of the year. 10. What factors are influencing the decision making process for developers and investors with regard to expansion over the next 12 months? Over the past twelve months, around two-fifths of our developer and investor respondents have expanded their European technical real estate portfolios. Of these, almost all have done so by building or fitting out more of their existing technical real estate, rather than starting new schemes; with only a limited number expanding through the purchase of existing facilities. Given their generally positive outlook regarding market sentiment illustrated through the Barometer, it comes as no surprise to learn that almost half of respondents state that they will be looking to expand their portfolios over the coming 12 months, although as with the last survey, only a limited number are prepared to do so on a purely speculative basis. Despite this improvement in market sentiment, the average they would need to secure a pre-letting agreement has risen from 50% of the space before they will proceed, to 80% in our latest survey. Unsurprisingly, demand remains the single most important factor in influencing the decision making process for developers and investors. One important factor to note is that although two thirds identified existing demand as an important factor during the coming 12 months with a further one-fifth noting expected demand as a key driver, the respective proportions this time around are onethird for existing demand and almost half for expected demand. This suggests respondents are looking more to the second half of 2012 for demand drivers for take-up, rather than the immediate six months. Interestingly, lack of supply is cited by only one-in-ten as a factor in the decision making process. For those respondents with a third party managed facility, the range of power usage was marginally down on the results of our previous survey, with an average power draw of around 3.1 kw per sq m, previously 3.2 kw per sq m. In contrast with the last survey, respondents expected that over the next 12 months this would slightly decrease to around 2.9 kw per sq m.

12 12 On Point Data Centre Barometer Autumn 2011 Data Centre Opinions 11. For our next data centre build out we would consider a containerised/modular data centre solution For our next data centre build out we would consider a containerised/ modular data centre solution disagree Disagree Neither agree or disagree Agree agree 0% 10% 20% 30% 40% 50% 60% of 2012 than they were in Spring this year, with just over half sharing this view contrasted to two-thirds previously. The overall strength of either agreement or disagreement remains small, with three quarters of those who expected a rise believing that it would be by 10% or less. Similarly, of those who expected to see a fall in pricing over the period, two-thirds believed that this would be 10% or less. We believe that pricing per rack/per cage/per suite/ is likely to increase over the first half 2011 disagree Disagree Neither agree or disagree Agree agree 0% 10% 20% 30% 40% 50% 60% 70% 80% Over the past six months we have seen a substantial change in the attitude of our respondents to the issue of modular or containerised data centre options. Six months ago we found that around one-in-three respondents would consider this type of option for their next data centre; this proportion has now doubled, reflecting the attractiveness of the flexibility and speed to market of this type of approach. Fewer than one-in-five of all respondents still remain undecided on the issue; six months ago this proportion was around half. Around 80% of our corporate respondents expressed positive sentiment to a containerised/modular data centre solution. Around half of our colocation/hosting and IT integrator respondents expressed positive sentiment to a containerised/ modular data centre solution, an increase on the third last time around. 13. We believe that the availability of finance for corporates will increase over the next 12 months allowing them to carry out data centre expansion plans We believe that the availability of finance for corporates will increase over the next 12 months allowing them to carry out data centre expansion plans disagree Disagree Neither agree or disagree Agree agree 0% 10% 20% 30% 40% 50% 60% 12. We believe that pricing per rack/per cage/per suite/ is likely to increase over the first half 2012 Around half of respondents believe that the cost of occupying data centre floorspace will increase during the first half of 2012, a fall on the 70% noted in our last survey. One-in-three of respondents favoured the status quo. IT service provider respondents appear less convinced that pricing for data centre accommodation will rise in the first half Given the increased volatility in European economies and uncertainty with regard to the Euro, it is perhaps unsurprising that there has been a decline in those who expressed a positive sentiment that companies would have greater access to finance for data centre expansion over the coming year, compared to our previous survey. Indeed, it is encouraging that there are still at

13 On Point Data Centre Barometer Autumn least half of respondents who believe that access to finance will increase over the next 12 months, given this renewed economic turmoil. However, there was a marked increase in those who expressed a negative sentiment; up from around one in eight to around onein-four. In addition, unlike the previous two surveys, a number of respondents now strongly disagreed with the statement. Real estate developer and investor respondents are the most confident that difficult finance raising conditions may be subsiding according to our survey, although the latest turmoils experienced post our September survey impact on this. Corporate occupiers continue to remain more cautious, with around one quarter believing that access to money would become easier over the year, a proportion unchanged on the preceding survey. 14. We believe that in the next 12 months we will actively source at least 10% of our data centre power explicitly from renewable power resources We believe that in the next 12 months we will actively source at least 10% of our data centre power explicitly from renewable power resources. disagree Disagree Neither agree or disagree Agree agree 0% 10% 20% 30% 40% 50% 60% 15. Consolidation amongst European third party data centre providers is likely to limit choice for users of data centre services over the next 12 months The acquisitions of UK Grid in Manchester and Data Electronics Group in Ireland by TelecityGroup as well as Lumison s acquisition of DediPower, are just a few recent examples of the ongoing trend for takeovers and mergers amongst data centre service providers over the course of the year. There has been a substantial uplift in the numbers of those who do not see such a trend as potentially problematic for choice. A significant number of our respondents expressed a neutral stance on whether consolidation amongst providers will limit users choice of data centre services, with over a third neither agreeing nor disagreeing with the statement, although this is a reduction on the majority recorded in our Spring survey. Those who tended to agree, were generally on the supply side or advisory side of the industry, a continuation of the trend identified in the last survey. In contrast there has been a decrease in those corporate respondents who see consolidation within the industry as problematic in the sense of potentially limiting choice of provider. Consolidation amongst European third party data centre providers is likely to limit choice for users of data centre services over the next 12 months 60% 50% 40% 30% 20% 10% For the second successive survey, we have monitored a positive shift towards those in favour of respondents who agree with the statement. Less than 10% disagree to some extent that they will actively source renewable power. Over 60% of respondents agree to some extent that they will source at least 10% of their power from renewable resources, up from 55% last time around. 0% Agree Agree Neither agree or disagree Disagree disagree

14 14 On Point Data Centre Barometer Autumn When choosing a new data centre, please rank the following factors in order of importance where 1 is the most important and 5 is the least important Amongst IT integrators, carriers and colocation operators, the proportion of positive responses has fallen from just less than two-thirds indicated in the last survey to just less than half. When choosing a new data centre, please rank the following factors in order of importance where 1 is the most important and 5 is the least important Availability of appropriately skilled employment base Physical security Efficiency of data centre Location Availability of power Most important Least important We would consider a data centre over 200 km away from our primary IT hub if there were significant (20%+) cost advantages disagree Disagree Neither agree or disagree Agree agree 0% 10% 20% 30% 40% 50% 60% The most important driver in the decision making process with regard to the choice of a new data centre remains the availability of power, with over half of respondents ranking availability of power as their first choice and nearly 90% ranking it in their top two in order of importance an increase on the 80% recorded in the last survey. Location continues to be second in order for importance; around two-fifths of respondents ranking it the most important factor up from around a third and a further third ranking it second in importance. The availability of a skilled labour force remains the least important perceived factor when choosing a data centre. 17. We would consider a data centre over 200 km away from our primary IT hub if there were significant (20%+) cost advantages Nearly two thirds of our respondents would be prepared to consider a data centre location over 200 km away from their existing facilities if they could be assured of cost savings of 20% or more. Whilst this is a marginal decrease on the 70% recorded in our Spring 2011 survey, there has been a large shift in the number of respondents who agreed in our last survey compared to strongly agreed in our latest analysis. The corporate sector remains the most supportive; almost all of our respondents from this sector expressed an agreement, a continuation of the trend recorded in the preceding survey. 18. We would consider a data centre in an alternative country in Europe if there were significant (20%+) costs advantages We would consider a data centre in an alternative country in Europe if there were significant (20%+) costs advantages disagree Disagree Neither agree or disagree Agree agree 0% 5% 10% 15% 20% 25% 30% 35% Nearly 55% or respondents expressed a positive sentiment towards a potential relocation internationally if there were direct or indirect financial benefits, an uplift from the 45% recorded in the last survey. The corporate sector remains a particular driver of this change with around four-in-five of our corporate respondents indicating that they would consider another country, a proportion unchanged since the preceding survey six months ago. Two fifths of IT integrators, carriers and colocation operators said they would consider that option, a rise from the quarter that said they would in the previous survey.

15 On Point Data Centre Barometer Autumn Letter from America Data Centers and the USA Trends by geography Across the US and around the world, data centers have made significant strides in public appeal. It was no more than five years ago, that if the word data center was mentioned, it was commonly either confused with call or contact centers or simply an element of the unknown. This circumstance exists no more, and the data center world is no longer a sole target of the IT sector. Data centers have flourished by impeding on conventional wisdom officially transforming the concept and its relative subject matter into a topic in the mainstream. There are many reports, publications and articles out there that focus on the industry s technical side or investment side. We look to open a door to those who are simply curious about the industry and its most recent behavior. Our intent is to divide the continental United States geographically into three sections, and explain (1) what type of data center user is attracted to said area and (2) provide a general explanation as to the reason they are locating to these respective areas. The geographic areas under review are (1) the Central US, (2) the Eastern US, and (3) the Western US. When thinking data centers and site selection, it is important to distinguish between the types of data center users. For simplicity s sake, we ll divide these types of users (or those looking for data center space) into two main categories: (1) the smaller data center user, looking for under 150 kilowatts ( kw ) of critical power in the data center market (note: data center users cannot be gauged by looking for space (or square footage) any longer the new trend for data center users is now based on the amount of power they consume, not by the footprint they occupy) and (2) the larger data center user (or the enterprise user), looking for 150 kw and above. Similarly, specific trends in the industry must be understood that distinguish a primary data center market from a secondary market. The smaller data center user will commonly drift to certain major (primary) metros, where connectivity is highly favorable primarily because that is where the supply exists. Those who build data centers and lease to these smaller data center clientele know that these types of users typically need to be in an area where there are lots of people. This is usually a function of needing to be where their customers are, thereby procuring a demand centered in areas of dense population. Data Centres by regions West coast Central US East coast

16 16 On Point Data Centre Barometer Autumn 2011 Central US Dallas, Texas Type of Data Center Primary Data Center Market Size of User in Small and Large Users Reason for Site Selection: Dallas has a desirable central proximity from west coast to east coast and is also a peering point location - or area where fiber connectivity is highly favorable. Colocation and wholesale providers, developers, and enterprise users are currently investing in the area to add more data center space and available supply than practically any major metro in the US. Dallas proper has been a long time target for colocation providers while the areas immediately surround the metro, such as Richardson and Plano, have been a favored location for developers and enterprise users. Denver, Colorado Type of Data Center Secondary Data Center Market Size of User in Small Users Reason for Site Selection: Virtually no current supply exists in this market (with the exception of one alternative from a single tenant, enterprise perspective), and the users who choose Denver have typically lease smaller footprints from a colocation provider in or immediately surrounding the downtown area. Given the favorable fiber connectivity and central proximity, Denver sees a lot of interest and activity, but few enterprise users choose Denver due to the lack of economic incentives available. Periodically, interest in the suburbs north of Denver is sparked driven by the cheap cost of power at +/- $0.04 / kwh. Colorado Springs is also an area that receives a great deal of attention and is actually underway with enterprise users and projects deploying the wholesale model. Chicago, Illinois Type of Data Center Primary Data Center Market Size of User in Small and Large Users Reason for Site Selection: Chicago is a major fiber hub and is one of the nation s peering points (see Dallas comments for definition). The many existing downtown colocation providers in major facilities provide a great deal of appeal to the smaller data center user by offering respectively low power rates for a major metro through ComEd (power company). Suburbs such as Northlake have also attracted major tenants like Microsoft while simultaneously bringing in developers and major third party providers who are building out space, commonly deploying the wholesale concept. Kansas City, Missouri Type of Data Center Secondary Data Center Market Size of User in Large Users Reason for Site Selection: The area and immediately surrounding areas (such as Kansas City, Kansas) maintains legislated data center incentives targeted at enterprise users. The area boasts a business friendly environment with a regulated utility (with good rates but mainly attractive for price stability). Kansas City is a data center sophisticated community that has attracted many enterprise users such as Bank of America. Omaha, Nebraska Type of Data Center Secondary Data Center Market Size of User in Large Users Reason for Site Selection: Omaha is an aggressive data center community with legislated data center incentives targeted at enterprise users. It is a business friendly environment with some of the nation s lowest power rates at or just under $0.04 / kwh. The data center sophisticated community has attracted major companies like Yahoo!, and the area continues to push to attract the enterprise user. (West) Des Moines, Iowa Type of Data Center Secondary Data Center Market Size of User in Large Users Reason for Site Selection: Like most secondary markets that tend to attract large data center users, Des Moines has legislated data center incentives that are targeted at the enterprise user. It is a business friendly environment with some of the nation s lowest power rates right at $0.04 / kwh. This data center sophisticated community has attracted the mega data center from Microsoft and has continually seen much interest from the enterprise data center user. The area continues to aggressively push to attract the enterprise users.

17 On Point Data Centre Barometer Autumn East Coast New Jersey area / Manhattan, New York Type of Data Center Primary Data Center Market Size of User in Small and Large Users Reason for Site Selection: New Jersey with its proximity to Manhattan and robust fiber availability ranks it in the top echelon of global data center markets. The financial service industry continues to be the corner stone of the market, with other industry sectors such as pharmaceutical, medical and media growing steadily. The colocation offering continues to thrive with both wholesale and retail offerings. The trend for corporate data center growth has shifted greatly to the outsource colocation offering. Proximity and connectivity of data centers to the financial exchanges seeking low latency has been extremely important to the site selection process. The Manhattan market is in the process of reinventing itself, as most large corporate data centers have migrated to the suburbs; meanwhile the colocation offering continued to expand. Currently there is limited supply, but planned expansion from colocation operators will bring new inventory online over the next 24 months. in New England, Boston maintains a unique position as a leading innovative economy. New designs have recently hit the market to include air side economizers and co-generation which offset high power costs. The Boston data center market is seeing historic levels of investment by colocation and wholesale providers, and is steadily importing new entrants into the available data center space. Atlanta, Georgia Type of Data Center Secondary Data Center Market Size of User in Small and Large Users Reason for Site Selection: Often designated the Capital of the South, Atlanta is the hub of data center activity and growth for the southern East Coast. It is one of our nation s peering points for major U.S. NAP s, and has excellent fiber connectivity and low latency services. Colocation providers offering both wholesale and retail offerings have continued to invest and expand in the region, with growing inventory in the works. With competitive utility rates and highly reliable networks, Atlanta is suited to continue to grow as a data center hub. Ashburn, Virginia / Northern Virginia Type of Data Center Primary Data Center Market Size of User in Small and Large Users Reason for Site Selection: Ashburn, Virginia / Northern Virginia (located approximately 25 miles west of Washington, DC) continues its historic trend as a top tier data center market in the US and around the world. Northern Virginia appreciably benefits as a premier market of choice by small and large data center users given that the foundation of the Internet was developed by the US Federal Government in Washington, DC (ARPANET). Being the home of the Internet backbone offers enterprise users numerous fiber connectivity peering points as well as low latency throughput for today s demanding global users (cloud computing, e-commerce, enterprise applications, network storage, etc). Enterprise users also benefit in that Northern Virginia has limited exposure to natural hazards, while offering favorable costs of power (in terms of $/kw). Boston, Massachusetts Type of Data Center Secondary Data Center Market Size of User in Small Users Reason for Site Selection: The Boston metropolitan area is a maturing data center location with interest stemming from the most sophisticated financial, educational, healthcare, technology and biotech users. Notwithstanding the high price (in $/kw) for electricity

18 18 On Point Data Centre Barometer Autumn 2011 West Coast Southern California Type of Data Center Primary Data Center Market Size of User in Small (and Medium) Users Reason for Site Selection: There are several distinct markets that make up the Southern California region: Los Angeles, El Segundo, Orange County, and San Diego. Though the area is home to a diverse group of verticals and many of those enterprises may host their own data centers as part of corporate facilities, or regional facilities, generally speaking, there are more smallto medium-sized data center users than large. Most enterprises leverage their IT infrastructures by taking advantage of colocation facilities that dominate the landscape. Furthermore, though Los Angeles (and Southern California, in general) is home to a variety of different businesses, certainly, the entertainment industry and the gaming sector are impacting the supply and usage of data centers in the region. With a few notable exceptions, utility charges from the primary providers (Los Angeles Department of Water & Power; Southern California Edison) range between $0.09 to $0.14 / kwh. Rates can be reduced if a substation is built and a sub transmission rate is negotiated. Downtown Los Angeles s most notable building, One Wilshire, is the main peering and network access point. Seismic activity associated with the Southern California region typically disqualifies the market for large enterprise operations even though most still perceive the need to have their servers proximate to business operations. The state of California does not offer incentives to data center users or operators though certain municipalities have enacted programs to exempt data center users from local sales taxes. Northern California Type of Data Center Primary Data Center Market Size of User in Small and Large Users Reason for Site Selection: The San Francisco Bay Area and Silicon Valley are the primary data center activity areas in this region, though Sacramento is becoming a market force. There is no doubt that of the three sub-markets, the Silicon Valley is experiencing the most dramatic growth in supply and sustained demand. The principal drivers for this demand are based on the continued growth of Internet application hosting, E-commerce and technology innovators. Furthermore, the electricity rates from Silicon Valley Power being the lowest in the Bay Area have fueled this growth as well. As Santa Clara does not levy a utility tax, users and operators are able to yield significant savings over other proximate locations. Over the past year delivery of space in Santa Clara from a variety of operators has been brisk with the available inventory rising to well over 200,000 square feet of conditioned and wholesale space. Though not nearly as robust as the Bay Area, Sacramento is experiencing increased construction activity. New developments in the region boast low-cost power ($0.08 / kwh) and no seismic activity. As absorption continues in the Bay Area, opportunities in Sacramento will certainly attract new users. Seattle, Washington Type of Data Center Secondary Data Center Market Size of User in Small and Large Users Reason for Site Selection: Based on sheer market size alone, Seattle is considered a Tier1 data center location, having more than 30 data centers comprising more than one million square feet. The area is hub for four of the top 10 national colocation providers. Market growth has been stimulated by providers as much as the saturation of enterprise users, especially in the technology sector. However, the market is home to very diverse verticals including aerospace, gaming, healthcare, biotech and retail. With two major carrier hotels in the city and the existence of APAC POPs of many carriers, connectivity is abundant. This combination of forces has also spawned the proliferation of colocation and managed service providers. Central & Eastern Washington Type of Data Center Secondary Data Center Market Size of User in Large Users Reason for Site Selection: The landscape in Central and Eastern Washington is focused much more on enterprise level wholesale space and developers that provide such opportunities. Known for its hydro-power with pricing lower than every other major market in the US ($0.02 / kwh) as well as for reduced risk from natural disasters, the area has gained popularity and sparked the enterprise users interest over the past several years. Phoenix, Arizona Type of Data Center Primary Data Center Market Size of User in Small and Large Users Reason for Site Selection: Historically, Phoenix has been considered a prime location for disaster recovery solutions, which has benefitted enterprise users and colocation / managed services providers. Adding to that the relatively favorable cost of power (compared to other primary data center markets) and reduced exposure to natural disasters, the area has gained greater appeal and extending its consideration as a primary data center market. Marquis retail and wholesale providers as well as Fortune 500 companies have developed facilities and are continuing an aggressive expansion strategy.

19 On Point Data Centre Barometer Autumn Las Vegas, Nevada Type of Data Center Secondary Data Center Market Size of User in Small Users Reason for Site Selection: Las Vegas is considered a secondary market, but is expeditiously becoming a beneficiary of disaster recovery and business continuity strategies for those smaller users who are looking to export their smaller data center footprint out of California. The market is home to some prominent colocation and managed service providers that appear to be pulling a lot of the data center interest typically reserved for the Phoenix market. Salt Lake City, Utah Type of Data Center Secondary Data Center Market Size of User in Small and Large Users Reason for Site Selection: Recently, there has been a great deal of press dedicated to this market, which is attracting large enterprises including the public sector. Prior to this activity, the prominent players in the area were a number of colocation and managed service providers that populated a number of smaller data centers. With the proliferation of the enterprise market, growth in the colocation sector has subsequently developed a stronger presence over the past three quarters. Brian Oley Associate Director Data Center Solutions Jones Lang LaSalle Dallas, TX Sumner Putnam Associate Director Data Center Solutions Jones Lang LaSalle Parsippany, NJ Michael Siteman Executive Vice President Data Center Solutions Jones Lang LaSalle Los Angeles, CA

20 20 On Point Data Centre Barometer Autumn 2011 Data Centre Opportunities Uxbridge Road, Ealing 5 dedicated Data Halls 5 MW of secured power Planning Permission for Data Centre Use N+1, Tier 3 design Available fully fitted or shell and core Bury Green Farm, Essex Secure 11 acre site Planning for Data Centre Use 25 MVA of reserved power Up to 80,000 sq ft of technical space Available as powered shells Perivale Park, West London Secure site Planning for Data Centre Use 6 MVA of reserved power Up to 26,000 sq ft of technical space Available as a powered shell Asheridge Road, Chesham Secure 6.5 acre site Planning for Data Centre Use 25 MVA of energised power on site Up to 90,000 sq ft of technical space Available as powered shells Western Road, Bracknell Secure 3.2 acre site Planning for Data Centre Use 10 MVA of reserved power Up to 30,000 sq ft of technical space Available as a powered shell Westfield Road, Tring Secure 10 acre site Planning for Data Centre Use 30 MVA of data centre power Up to 172,000 sq ft of technical space Available fully fitted