ViewPoint European Data Centres

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1 CBRE ViewPoint European Data Centres 212 IN THIS ISSUE Executive Overview Colocation & Take-up & Demand Forecast Market Focus London Market Focus Paris Market Focus Frankfurt Market Focus Amsterdam Market Focus Madrid Data Centre Topics Definitions EXECUTIVE OVERVIEW The third quarter has continued to show erratic demand in the Tier 1 markets, illustrating the unease created by ongoing unrest in the global economy. The tone of the market remains positive however, with optimism displayed through delivery of new supply, which underlines operator confidence in the fundamental drivers of the sector. There is little doubt that trading conditions for business at present remain challenging. The Eurozone, at the time of writing, has slipped back into recession with the UK currently experiencing limited growth. The consequence for data centre operators has been end users showing greater caution when acquiring new space. This cautious approach is being reflected in the amount of take-up currently. Takeup in the third quarter of 212 was less than in the previous quarter although it is typical to see a reduction in transaction volumes mid-year. A year-to-date comparison now shows that colocation take-up is 7.2% lower than in 211. The customary surge in contracts being signed before year end however may see this deficit close. It has been encouraging to see active market demand, measured through new enquiries, remain at a promising level. All markets continue to receive new interest from potential end users, mainly technology sector driven. The increase in new cloud products being brought to market in particular proves to be a strong source of data centre demand. Placement however is taking longer which at present is impacting on total take-up. This is most evident in Amsterdam where take-up was at record levels in both 21 and 211. This year has not produced a repeat, although Amsterdam continues to receive considerable interest. In London and Paris, both markets are now on par with their respective totals for colocation take-up for 211. London in particular has seen some larger requirements being concluded which has resulted in a takeup total for wholesale space double that of last year. New build activity by the colocation operators has been at an increased pace in 212, seeing new supply being added in most locations. Total supply in the European Tier 1 markets has risen by 53,581 m² or 84MW since the beginning of the year marking the highest increase since 27. This uplift in committed new investment is significant as it shows an assured expectation of future demand growth for services by the leading European providers. It is clear that current volatility in the global economy is being reflected in weakened end user confidence and unpredictable data centre take-up. Economic stability will undoubtedly mean a greater appetite for spending on data centre services. Notwithstanding this, emphasis on corporate efficiency, increases in cloud usage and compliance, should sustain data centre demand in the medium term. EUROPEAN TIER 1 COLOCATION MARKET PERFORMANCE AS AT Stock Vacancy Rate Colocation Take-up 212 7, ,656 12, % 28,25 YTD , ,328 71, % 3,185 YTD % Change +13.% +9.8% +42.9% +3.7% -7.2% 212 CBRE Ltd.

2 m² (thousands) MW m² (thousands) COLOCATION SUPPLY & AVAILABILITY Additional new supply has continued to be added to many of the Tier 1 markets during the third quarter as operator expansion and build programs take shape. Total supply of European data centre space has now been increased by 53,581 m² or an additional 84MW of IT power since the turn of the year. This 9.1% rise now marks the highest increase since the credit crisis began and provides indication of expectant demand by operators. The breakdown of this shows that a significant proportion of new powered shell space has been brought to market by wholesale operators, particularly in London which is the hub of the European wholesale data centre market. Total wholesale supply has now risen by 22,377 m² or 34MW since the turn of the year with 77% of this in London. The rise in wholesale space represents the ongoing trend from end users of moving from capex to opex models which is a consequence of tightened budgetary spending brought about by the weakened business environment. Similarly the European retail operators have continued to progress expansion plans in the Tier 1 markets adding another 16,66 m² to European supply during the quarter. This latest addition means that since the beginning of 212 retail supply has increased by 31,24 m² or 51MW. The majority of this has been in London, Amsterdam and Paris and had been required given the low levels of availability recorded at the start of Overall availability is now on a gradual upward trajectory restoring market balance. At the Quarter 3 point in 212, total availability of data centre space in European Tier 1 locations increased to 16.8%. Vacancy rates have now shifted upwards in all Tier 1 locations as a result of the new space that has been added As 212 closes and thoughts turn to the new year, we can expect 213 to continue on a similar path. Expansion and new build projects that were committed to this year will continue to come to market with all Tier 1 markets expected to see further increases. The total amount of announced new supply could result in an additional 67, m² or 13MW of IT power being added by the end of Page 2

3 City Lines (thousand m²) Total Bar (thousand m²) MARKET NEWS SUPPLY Set against a background of an ongoing cautious outlook for the European economy, the supply side of the technical real estate market has had a relatively active quarter. It appears that the main Tier 1 locations continued to benefit from these recent expansion plans, although there is still evidence that more secondary locations are appearing on the radars of builders and operators of data centres across Europe. Amongst the major retail and wholesale colocation providers, Interxion reported the opening of the first 5 m² of a planned 2,5 m² data centre in Paris, as well as a further 1,6 m² at its second London data centre to be completed by the end of 212. In addition, Savvis announced the opening a new modular build-out data centre in Frankfurt, whilst in the Netherlands, EvoSwitch opened its 4MW Hall 6 of its Amsterdam-Haarlem campus site, increasing the facility to over 12,m² of data centre space in total. In the UK, Equinix announced the opening of a further 4, m² of its London LD5 data centre, Telehouse reported a 1, m² expansion of its Telehouse West facility in London Docklands, and Eurohub announced that it is to develop a second data centre facility in London s Docklands at 1 Greenwich View. Pulsant has completed the first phase of its 14 million investment programme to create a new 8,4 m² South London Data Centre Campus at its existing site in Croydon. Also in London, Virtus announced the expansion of its Enfield data centre to provide a further 2,1 m² of net technical space with 3MW of power. Outside of the Capital, Vtesse Cirrus added a further 28 m² of colocation space at its Hoddesdon site, CentriLogic launched its European expansion program with the opening of the first 5m² at its new data centre in Bracknell, whilst in South Wales, Next Generation Data launched a dedicated colocation data hall at its Newport facility. RETAIL COLOCATION AVAILABLE STOCK PER TIER 1 MARKET 3 Further north, ScoLocate completed a 1MW upgrade of its Edinburgh facility, whilst the city also saw Onyx launch the latest build-out phase of its facility. Evidence of development activity, especially construction activity of a speculative nature, remains limited. However, the third quarter of the year saw the announcement of a number of key projects in the UK. Probably the most notable was Infinity s confirmation as preferred bidder by the London Legacy Development Corporation for the legacy uses of the Press and Broadcast Centres on the Olympic Park. Through its subsidiary, icity, the company announced it has plans for a data centre of up to 32,5 m², with total power capacity of up to 9MW. Outside of London, Lasercharm announced the launch of the first 3,75 m² of net technical space at its Camro data centre near Cambridge, whilst ANS revealed plans to build a 1,9 m² facility in the digital media hub based in Newton Heath, east Manchester with an option to take a further 1,9 m². In Leeds, The Yorkshire Design Group announced plans for a 16 million development to create a data centre on former Yorkshire Chemicals land in Hunslet. A detailed planning application is expected before the year end. The third quarter of the year saw the continuation of the important role that IT Integrators and telecom companies play in the data centre industry. In mainland Europe there were a number of announcements, including French data centre operator Neo Telecoms and Euclyde who opened their new facility in Besancon, one of a dozen new such facilities that Neo reported it would launch in France before the end of this year. Also in France, telecoms group, Iliad Enterprises, increased the capacity of its data centres for colocation services. Their first facility opened in Vitry with 8, m² of space, the company has also bought a 12, m² building in Paris's 15th district. Source: ixconsulting Total (RHS) Amsterdam Frankfurt London Madrid Paris Page 3

4 m² (thousands) TAKE-UP & DEMAND TOTAL MARKET TAKE-UP BY MARKET SECTOR Demand for data centre space remains relatively strong although the third quarter has proved that occupier caution is heightened. All markets are reporting a rise in new enquiries although the time being taken for some of these to settle is being extended. Uncertainty centred on global economic difficulties still overshadows any positive trends that are being drawn by businesses which are adding delays to contractual processes The amount of colocation space currently being secured has suffered as a result. Total colocation takeup in the third quarter was 5,34 m² or 7MW of IT load. The middle six months of the year often see takeup fall back across the Tier 1 markets so the lower level seen is not wholly unexpected. Total colocation take-up for the year is now 28,25 m² or 37MW of IT load, now just short of the equivalent period in 211. New enquiries continue to be led by the technology and telecoms sector where additional capacity is being required to service growth in demand for digital services. Some additional demand is also coming from renewed corporate activity and government requirements, although in general corporate occupiers, particularly financial services organisations, are less enthusiastic to commit to significant IT spend at present retail colo wholesale colo self build threat stock TOTAL TAKE-UP IN 212 AS AT QUARTER 3 Paris 19% Amsterdam 14% Cloud deployment continues to provide consistent demand across markets with Amsterdam and Frankfurt seeing the lion s share. Equally, growth in the use of digital media for business and personal consumption has remained an active source of new revenue. Requirements to support this area from content delivery networks in particular are proving to be valuable wins for data centre operators and although smaller in size initially, have significant growth potential. Madrid 2% Frankfurt 2% As we enter the final quarter our expectations are that total take-up of colocation data centre space this year will be close to that of 211. The weakened economic environment, although at present encouraging some inactivity at present, may well speed up the process of corporate outsourcing moving forward. Technology demand, not immune to global economic pressure, appears to show more resilience and this sector displays one of the limited examples of business growth globally. With the data centre a fundamental link to operational efficiency for many of the digital services being offered, we can be optimistic that this sector will continue to drive new demand for the foreseeable future. TAKE-UP London 45% European Tier 1 Cities Colocation Take-up Total Market Take-up 28 72,3 96, ,11 48, ,61 45, ,135 47,15 YTD ,25 28,69 Page 4

5 MARKET NEWS DEMAND Ongoing concerns about economic prospects across the global landscape provide a background of uncertainty within the European technical real estate market. However, the latest evidence continues to suggest that demand for new data centre space remains, with IT strategies for many companies underpinned by a firm intention to pursue the right data centre solution, either within its own company sphere or outsourced to a third party. There is continued support for IT outsourcing as a preferred solution, with examples in the third quarter including: Royal Dutch Shell reportedly extended their relationship with T-Systems to manage their data centre infrastructure, CEMEX, the global building materials company, and IBM agreed a 1-year full IT services contract, and in the UK, Slough Borough Council outsourced its data centre to Savvis. Also in the public sector, Bristol City Council contracted with Agilisys for IT services, whilst Capgemini agreed a four- year IT services deal with Lambeth, Lewisham, Barking & Dagenham, Brent, Croydon and Havering Councils. Outside of the UK, Hewlett Packard reported plans to provide IT infrastructure services to consulting company, MLP Finanzdienstleistungen and retailer Media-Saturn in Germany, whilst in Switzerland, Swisscom IT Services agreed contracts with banking and finance group, Valartisis. In addition, Atos agreed a seven year IT outsourcing deal with the merged Danish and Swedish postal provider, PostNord, and in Spain, Logica Iberia concluded a ten-year contract with the banking group Grupo Crédito Agrícola for the delivery of IT infrastructure and data centre management services. Although difficult to quantify in terms of actual floor space, anecdotal evidence suggest that the third quarter saw colocation suppliers continue to benefit from demand. In the UK, deals included Ark Continuity s contract to provide a modular data centre solution for Talk Talk, PEER 1 Hosting and Calyx Managed Services announcement of colocation services for the Federation of Small Businesses, and TelecityGroup signed colocation contacts with Figaro Classifieds in France and Transaction Network Services and NxSystems in Dublin. A notable example of corporate activity saw Tesco sign a 15-year lease with data centre operator, Sentrum. The data centre is the first stage in a five-year project by Tesco to rationalise its existing estate of 21 data centres worldwide, and will host the infrastructure for the Tesco.com website and the group s management information systems and food replenishment systems, with more infrastructure to be added over time. In addition, banking giant Goldman Sachs agreed a global partnership with data centre company IO for data centre provision in the UK as well as Singapore and the US. Source: ixconsulting The quarter provided an interesting example of a major corporate swimming against the tide of a move to data centre outsourcing, albeit seemingly at the detriment of its European portfolio. General Motors announced plans to open four new IT centres in the US, part of a move to bring 9% of GM's IT in-house. The company plans to consolidate its 23 data centres, including European presence, into just two: a process which is already underway. Page 5

6 m² (thousands) FORECAST The outlook for the European data centre market remains positive although the nature of the market continues to develop at great pace. The challenging trading environment has meant that customer demand across all markets has become more refined and in some ways more short term. We can see evidence of this at the moment with the majority of new larger requirements that have come to market most recently positioned in the 3-75kw bracket. This has been most evident in London although many of the European markets are seeing space and power requirements reduced in place of more flexible growth model contracts. Operators are becoming accustomed to adapting to the new norm, adjusting the previously rigid structure of operational models to become more flexible, with wholesale and retail operators competing in the same space. As competition for new business intensifies amidst the challenging trading environment that persists, further blurring of the market segments can be expected. Equally some of the pan European operators have made some strategic acquisitions broadening operational portfolios in the process or adding to existing market share. This reveals an increasing realisation of the heightened competition that now exists. It also recognises potential future growth in global demand for data centre services particularly from some of the emerging markets where a wealth of untapped demand exists. In preparation for this impending growth, expansion plans have begun to take shape with increased amounts of new supply committed to for 212 and the next few years. This trend has been seen before where several years of slow build activity have been followed by a sharp rise in new investment. Demand for data centre space maybe hampered at the moment due to the economic downturn. Longer term however the need for global connectivity will become increasingly important as a consequence of the greater proliferation of new or innovative technology usage. One area of immediate demand growth is in cloud deployment. Cloud technology remains the buzzword of the moment and is driving significant amounts of new revenue into data centre facilities. The flexibility in choice of location, associated with implementing remote cloud infrastructure for business, has not been as widespread as forecast with Tier 1 cities continuing to attract most of the demand. The reason for this is connectivity being more widely available in the established markets with the markets of Amsterdam and Frankfurt in particular seeing the benefits of this. Additionally, more companies, particularly larger corporations are becoming smarter about the data they collect and the way it can be used to shape business strategy. The importance of data to future business cannot be underestimated with the role of data management rising on the corporate agenda as the benefits become better understood. The potential impact on demand for data centres is huge as businesses require sufficient capacity to collect, store and analyse data collected. EUROPEAN TIER 1 MARKET HISTORY AND FUTURE PROJECTION Projection P 213 P Colocation Colocation Take-up Page 6

7 MARKET NEWS INVESTMENT Following an active second quarter of the year, the third quarter of 212 saw little sign of a slowing in the level of merger and acquisition activity across the industry, with particular focus it seems on companies that add value through managed services. In the UK, Six Degrees Group acquired Cloud Computing Centre as well as communications company, Aurora Networks, whilst agreements were announced for the acquisition of Melbourne Server Hosting in Manchester by Iomart, and cloud enabler, Fidelity Telecom, was acquired by Colt in the UK. In Finland, data centre provider Tenue, was acquired by TelecityGroup for 3.7 million. As a further example of confidence amongst investors in the industry, Ark Continuity completed a recapitalisation of its business by a consortium led by Revcap Advisors Limited. The recapitalisation will enable the company to continue to build out its UK platform through construction of further stock at its data centre campus at Spring Park, Corsham and Cody Park, Farnborough. In addition, data centre giant, Equinix, announced that it is to pursue a conversion to real estate investment trust (REIT) status, a move which the company s management feel will create long term shareholder value. One of the more intriguing announcements during the period saw French sovereign wealth fund, Caisse des Dépôts, provide part finance for the launch of two companies planning to develop cloud data centres across Europe. The investment will be approximately one third of the total 45 million raised. Numergy, owned by French mobile phone operator SFR, and Bull launched using 2 data centres owned by its parent companies, with plans to build more than 4 more across France over the next eight years, whilst France Telecom/Orange has also launched a new cloud company, CloudWatt together with the sovereign fund and Thales Group with plans to build a pan European data centre network. On a direct real estate investment basis, in the UK, Peel Land and Property Investments sold Joule House to Orchard Street Investment Management, for a reported 7.6 million. The property is a 4,6 m² data centre in Manchester leased to TelecityGroup. MARKET NEWS FORECAST The findings of a number of research reports published over the quarter provide supporting evidence that IT growth will continue to drive the market for technical real estate. A study from Gartner indicates worldwide IT outsourcing revenues are on pace to reach US$251.7 billion in 212, a 2.1% increase from 211. In a further boost for IT outsourcing as a driver of data centre demand, Savvis has published research suggesting that 6% of IT and business decision makers agree that owning and operating in-house IT infrastructure drives costs higher and wastes resources, up from 38% in 21. In addition, the global survey also found that organisations are now outsourcing just over 25% of their IT infrastructure and expect this to expand to more than 4% of their IT services over the next five years. The use of cloud computing continues to grow. Recent research from InformationWeek indicates that 67% of respondents are considering or currently using private clouds, whilst a Gartner study suggest that the public cloud computing services market is expected to grow 19.6% to reach US$19 billion globally this year on the back of infrastructure-as-a-service products. In addition, a new report by BroadGroup shows that cloud service development is a major driver for sustained data centre expansion in Germany, which is forecast to increase by 33% in space from its current base by 216. Containerised or modular data centres are now a significant feature of the global data centre market. A report by IMS Research suggests that shipments of containerised data centres are forecast to grow 4% in 213 compared to 212, following a near doubling of the market in 212. The report suggest that while growth will continue to be strong for shipments to North America, shipments to China are forecast to grow at nearly double the rate over the next five years due to the rapid growth in data centres in the region and the need for faster deployment times. Source: ixconsulting Page 7

8 m² (thousands) m² (thousands) MARKET FOCUS LONDON With the UK out of recession focus has again turned to how this may impact on data centre demand. London continues to command the majority of new demand in the European markets, although the general hesitancy of businesses to commit to IT investment has meant that the amount of take-up this quarter has been restrained. Following a promising first quarter, take-up in the London market has faltered over the middle six months with totals lower than last year. Market take-up in the third quarter of 212 was 1,76 m² transacted or 2.6MW, still the highest of the European locations but short of the longer term average. The total amount of colocation space transacted in the year is now 12,35m² or 18MW, ahead of the total for 211. In contrast to last year the wholesale sector accounts for circa 8% of take-up in 212. The beginning of the year saw several sizeable deals concluded and Quarters 2 and 3 have seen some smaller wholesale requirements settled. It is perhaps indicative of the present market conditions that the trend following the credit crisis has been for smaller wholesale requirements, 3-75kW, but in greater number. At this size requirements are able to be satisfied by both wholesale and retail operators which has added competition and pressure to pricing in the market. On the supply side, London is seeing a steady flow of new data centre space. New entrant to the market Safehosts opened its new facility in September and this has added to expansions of the pan European operators of Interxion, Equinix and Telecity. In all, the past 12 months have seen supply grow by 1% or 48MW which compared to previous years is the highest increase since 28. It can be seen that the desirability of the London market to major and new operators is continuing with the confidence in sustained demand evidenced by new investment. KEY MARKET HIGHLIGHTS Level 3 announced the opening of a new data centre in Hayes. COLOCATION MARKET KEY INDICATORS Vacancy Rate Take-up 274,369 51, % 1,76 Comparison on previous quarter 5-YEAR COLOCATION SUPPLY YEAR COLOCATION TAKE-UP Stock Infinity confirmed that its subsidiary, icity, is the preferred bidder to build a data centre of up to 32,5 m² on the site the Press and Broadcast Centres on the Olympic Park. Equinix reported the opening of a new 4, m² data centre phase in London. Telehouse announced a 1, m² expansion of its Telehouse West facility in Docklands. Virtus announced an expansion of its London data centre to increase the amount of net technical space by 2,1 m² Take-up 5-year average Page 8

9 m² (thousands) m² (thousands) MARKET FOCUS PARIS Paris continues to display some positive signs of renewed demand although take-up in Quarter 3 has not matched the beginning of the year. The economic and political situation is not aiding business confidence and most end users continue to adopt a wait-and-see strategy to their data centre acquisition. The third quarter of 212 has seen colocation take-up slip reflecting the cautious tone to the market. Total take-up in Quarter 3 was 845 m² or 1MW of IT load. This lower total however should not detract from the improvement being shown. To date a total of 5,54 m² or 8MW of colocation space and power has been transacted which is just short of the total in 211 and more than double the amount at the equivalent stage last year. As seen in the other major markets, demand in the market is surfacing mainly from the technology sector. The rise in cloud interest and the proliferation of internet use has led to new capacity-driven requirements. Cloud and hosting providers have taken pockets of space and there is also greater pressure on distribution networks for on-demand internet services. The Paris market remains dependent on corporate demand and it is general indecision from this area that is limiting larger requirements albeit these may form future demand as corporates are forced to outsource more data centre space for opex reasons. Confidence seems to be corroborated by the expansion activity from major operators. Paris has seen the highest growth rate of new supply of all of the Tier 1 markets over the last 12 months at 16%. Interxion and Equinix in particular have fortified their positions in the market securing large amounts of space and power. These investments made are to service expectant demand well into the future. KEY MARKET HIGHLIGHTS Interxion reported the build out of the first 5 m² of a planned 2,5 m² data centre in Paris. Iliad Enterprises has bought a 12, m² building in Paris's 15th district for a new data centre. COLOCATION MARKET KEY INDICATORS Vacancy Rate Take-up 13,51 14, % 845 Comparison on previous quarter 5-YEAR COLOCATION SUPPLY YEAR COLOCATION TAKE-UP Stock Take-up 5-year average Page 9

10 m² (thousands) m² (thousands) MARKET FOCUS FRANKFURT The third quarter of 212 has shown that the Frankfurt market remains in a state of relative stability with sustained although not exceptional demand present. The prospects for German economy in comparison to some of the other markets reported looks to be in relatively good shape and this is encouraging some business confidence toward IT procurement. However, it is activity outside of German borders that is presenting a cautious note with the Eurozone challenges continuing to unnerve some would-be data centre occupiers, particularly from the financial services arena. As a result of this, demand in the market is increasingly technology led. The Frankfurt data centre landscape is viewed as a key point of connectivity, similar to Amsterdam, and it is the strong connectivity that is attracting major telecoms, digital media companies and internet service providers. Cloud deployment equally is a source of new business and in some cases is being followed in place of dedicated corporate infrastructure. COLOCATION MARKET KEY INDICATORS Vacancy Rate Take-up 15,66 24, % 1,61 Comparison on previous quarter 5-YEAR COLOCATION SUPPLY Take-up for the quarter was 1,61 m² or 2MW of IT power transacted. This is representative of the longer term quarterly average although less than the previous quarter. Total take-up in 212 is now 5,72 m² or 5MW, less than at the equivalent point last year, although Quarter saw the conclusion of a large transaction at the Databurg (now Telehouse) facility which had boosted the quarters total. The supply/demand balance is in tune currently, with the level of new supply sufficient to service emergent demand. has risen by 7% in the past 12 months. One area of specific concern for data centre operators and users is the proposed increase to the EEG tax scheduled for 213. This is likely to increase the cost of consumption, unwelcome at this time of austerity, although unclear at present is the level of impact this may have on demand. KEY MARKET HIGHLIGHTS Savvis announced the opening a new data centre in Frankfurt YEAR COLOCATION TAKE-UP Stock First Advantage Litigation Consulting opened a new office and data centre in Frankfurt Take-up 5-year average Page 1

11 m² (thousands) m² (thousands) MARKET FOCUS AMSTERDAM The strong interest in the acquisition of data centre space in the Amsterdam market has so far not been reflected in the number of transactions being completed. Total take-up for the year at present is falling short of the rate of the previous two. The reason for this is more to do with the longer periods that are being taken to conclude contracts. Expectations are that market interest will result in an increase in take-up in the final quarter although another record year looks at this time to be unrealistic. Total take-up for Quarter 3 remains in line with the longer term quarterly average at 1,125 m² or 2MW of IT power. This is not at the exceptional level seen in the most recent years despite the high level of activity present in the city. Although the market has retained an above-average flow of smaller transactions, it is the absence of larger transactions, such as Softlayer in 211, which has affected the take-up total. The TMT sector has continued as the key source of new interest, attracted by Amsterdam s high level of connectivity which is fundamental to operational efficiency for this sector. The rise in cloud interest in particular has benefitted the Amsterdam market with AMS-IX providing an essential network platform for providers. One dynamic that the success of the past two years take-up has had on Amsterdam has been the rapidly falling amount of available supply. This dipped to a record low at the start of 212 of 9%. This has now begun to rise with supply increasing by 12% since Quarter More supply is scheduled to be added with the opening of Equinix AM3, Interxion AMS6 and Evoswitch Hall 6. These will return a healthier balance to the market and highlight the commitment from major operators underlining the confidence in sustained growth in demand. KEY MARKET HIGHLIGHTS EvoSwitch, announced the opening of new data hall at its Amsterdam-Haarlem campus site. COLOCATION MARKET KEY INDICATORS Vacancy Rate Take-up 83,517 11, % 1,125 Comparison on previous quarter 5-YEAR COLOCATION SUPPLY YEAR COLOCATION TAKE-UP Stock Phoenix NAP announced the opening of its European node, located at an Interxion data centre in Amsterdam Take-up 5-year average Page 11

12 m² (thousands) m² (thousands) MARKET FOCUS MADRID The third quarter of 212 has provided little improvement on the demand side in the Madrid market with no notable transactions completed. The increasing economic challenges that are present in country are proving a hurdle to the take-up of space by end users. As such a consistent flow of new demand has not been maintained. With greater effect than other major markets the unrest in the local economy is having a very real impact on end user attitudes toward new investment. At present corporate occupiers have one main goal and this is reducing cost. To assist this outsourced data centre solutions are being considered with some new enquiries present in the market. Nevertheless, any significant spending is currently being curbed by the weight of hesitancy toward future growth prospects. With Quarter 3 traditionally a quieter period for the completion of data centre contracts in Madrid it is unsurprising this three-month period has seen little take-up of note. Total take-up for the year remains at 53 m² or.4mw. This total continues to compare favourably with the equivalent period of last year at almost double the amount. With some smaller requirements present in the market we could expect to see this improve in the final quarter as transactions are pushed through prior to year end. New supply is also on the horizon offering a glimpse of the operator confidence in growth prospects for the market. Interxion s announcement earlier in the year of their intention to open a second facility has been welcomed. Available supply in Madrid has remained the lowest in the Tier 1 markets for some time with operators reluctant to fit out significant tranches of new space without the security of new contracts. This new facility is now taking shape and the first phase is due to open in 213 adding around 8 m² to the market offering. KEY MARKET HIGHLIGHTS Logica Iberia, signed a ten-year contract with Grupo Crédito Agrícola for the delivery of outsourcing services in IT infrastructure and data centre management. COLOCATION MARKET KEY INDICATORS Vacancy Rate Take-up 27, % - Comparison on previous quarter 5-YEAR COLOCATION SUPPLY YEAR COLOCATION TAKE-UP Stock Take-up 5-year average Page 12

13 DATA CENTRE TOPICS ADVERTISEMENT PROMOTION Securing Debt Finance for Data Centres By Steve Guy & John Wilson, Specialist Finance Team, Lombard Corporate Asset Finance Data centres (DC), although a relatively recognised service offering, are still viewed by many lending institutions as a new, specialised and complex asset class the intricacies of which may not be well understood. With a disproportionate capital spend on mechanical and electrical equipment to be installed within the DC, as compared to the cost of the shell, it is acknowledged that this is not a real estate play but a structured asset finance facility. In short, there is no doubt that a clear and deep understanding of the dynamics of this niche, albeit, rapidly expanding sector, is critical to a lender s risk evaluation. The interests of a lender are aligned with that of the DC provider this relates to the delivery of the fundamentals which will attract customers to a DC site. These fundamentals are as follows: acquiring or leasing an inconspicuous property in a location that has particular attributes, such as typically not being on a flood plain or on a flight path, and possibly with the capability of providing synchronous replication the availability of a significant power supply diverse fibre connectivity into the site, and security These component parts will attract tenants that will generate robust cash flows, which are of course critical to a lender. Once a site has been identified and planning permission obtained, the lender must conduct appropriate due diligence relating to a number of aspects. These include the professional advisors appointed by the DC management team, the design of the DC, the power contracts, the mechanical and electrical equipment that has been chosen to deliver the required resilience, the agreements between the DC provider and its customer to deliver the service, the tenant line up and the facilities management team responsible for the ongoing delivery of the service over many years. In terms of the funding itself, as mentioned above lending for DC set up is best suited to a structured asset finance facility, the advantage of which is that it provides flexible and efficient finance to enable DCs to move forward their business plans, while minimising risk and releasing capital to benefit investment in the business and, where relevant facilitate future expansion. When it comes to the equipment itself, dealing with a specialist asset finance provider means that the lender has a clear understanding of the specification, its reliability and its depreciation over the period of the contract, and can therefore introduce an appropriate asset management system to ensure that each element of the DC is assessed and efficiently maintained. However, at the heart of any successful funding arrangement is the early engagement of a potential lender. This enables all parties to be clear as to the requirements to secure debt, as every transaction will of course be unique. To be clear, there are few, if any, lenders in the current market who would consider making facilities available on a speculative basis. Finally, every DC lender will want to understand the equity contribution. Unfortunately there is a no hard and fast rule here, but as a guide it should account for at least 2% of total project costs. With demand for DC facilities growing, appointing the right lender is fundamental to the success of a potential DC provider. Take the time to do your homework in order to find the lender that is right for your business. For more information, please call Lombard on Type Talk Security may be required and product fees may apply. Page 13

14 DEFINITIONS TIER 1 MARKETS Amsterdam, Frankfurt, London, Madrid, Paris STOCK Colocation stock: carrier neutral data centres where the operator allows any carrier to connect into the facility and to connect to third parties within the facility, not discriminating between different carriers and charging only nominal fees for interconnection. This is split into two distinct offerings: Retail colocation: targets smaller requirements typically sold as racks, cages or suites in terms of floor space/it power and offers an element of at least smart hands and eyes. Colocation stock includes both fitted and shell expressed as a net technical floor space/it power equivalent figure. Wholesale colocation: targets larger requirements in terms of floor space/it power typically 5kw (35m 2 ) to 1MW (7m 2 ) and offering real estate FM services only. Held in shell prior to contract, includes both fitted and shell expressed as a net technical floor space/it power equivalent figure. SUPPLY Retail colocation supply excludes unbuilt phases of the data centre i.e. only fitted raised floor space is included. Wholesale colocation supply includes both fitted and shell data centre space. Typically wholesale operators sell shell space which is built out to suit customers. of space and vacancy rates are based on both fitted and shell space. AVAILABILITY Retail availability of space is based on vacant fully fitted space only. Wholesale availability is based on all vacant space. VACANCY RATE The vacancy rate is a product of availability/total supply. COLOCATION TAKE-UP This comprises data centre space committed to at retail and wholesale colocation facilities in the relevant quarter. TOTAL MARKET TAKE-UP This comprises of colocation take-up (retail and wholesale), significant secured data centre space classified as Selfbuild or Threat stock (either surplus carrier or corporate facilities). Self-build: typically land for development or modern empty warehouse which is acquired for conversion to a data centre for use by an end-user which will use the space for their own purposes e.g. a large bank. Threat stock: surplus carrier/webhosting space offered to the market as competing stock on a carrier neutral basis SPACE TYPE Shell: shell & core space is the base real estate of a data centre, a wind and watertight structure with exposed floor and ceiling slabs and exposed finishes to the walls. The landlord would obtain permissions for data-centre use and make provisions for tenants to install their own chillers and back-up power generating equipment. In addition, an incoming diverse raw HV (high voltage) power supply would usually be provided. Fitted: fully-fitted space is ready for tenant IT equipment to be installed almost immediately or subject only to minor works being carried out to account for bespoke equipment and layouts. Page 14

15 DATA SOURCE CBRE in association with Jonathan Heap, Director, ixnewssearch ixnewssearch is the leading daily news research service developed for organisations with a strategic interest in the data centre and mission critical facility industries. Groundbreaking at its inception in 21, the interactive ed document is packed with global news providing invaluable and timely insights into the business of data centres. CBRE DATA CENTRES CBRE formed a Data Centre team in 1994 to address the specialised technical real estate needs of high-tech firms such as telecommunications companies, data centre operators and corporates. Core technical real estate services provided by the Data Centre team include: Investment Disposal one-off assignments, multi-site marketing campaigns Acquisition one-off assignments, worldwide network rollouts Consultancy consolidation strategies, Mergers & Acquisitions Asset Valuation Bank, Corporate Project Management, Development Monitoring, Due Diligence, Building and M&E surveys Research market reports, statistics, take-up forecasting CBRE has monitored worldwide Colocation supply statistics since This bulletin relates only to the European Colocation Tier 1 markets. Additional market statistics are available on request. For additional data centre market information please contact: Andrew Jay Executive Director t: e: andrew.jay@cbre.com Darren Mansfield Analyst t: e: darren.mansfield@cbre.com CBRE has developed its market leading Data Centre Finder, which has become the go-to site for occupiers searching for data centre space globally. If you would like your data centre to be listed on the site, please contact: Simon Moore: simon.moore@cbre.com For a FREE, 3-week trial of ixnewssearch please contact: Jonathan Heap t: e: jheap@ixconsulting.co.uk Disclaimer 212 CBRE CBRE Limited (CBRE) confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no guarantee, warranty or representation about them. It is your responsibility to confirm independently their accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist. Page 15