SUPPLY, DEMAND, ENERGY AND LOCATION: THE FOUR PILLARS TO SUCCESS

SUPPLY, DEMAND, ENERGY AND LOCATION: THE FOUR PILLARS TO SUCCESS

DC RADAR The second edition of the Arcadis European Data Centre Radar, produced in conjunction with ixconsulting, is based upon extensive survey information gathered from key influencers across Europe, covering all aspects of the IT asset lifecycle from strategy to redefinition. Respondent Profile All groups face a series of challenges which help to shape and inform their perception of the health of the market. Iceland Norway Sweden Finland It delivers an ongoing measure of the health of the data centre market, and provides unique insight into the challenges, trends and drivers for change in the data centre industry. The survey has been designed to capture the views of a wide range of professionals operating within the data centre field and importantly, the end users. It covers responses from owners, developers and investors who control some 2.1 million m² of technical real estate across 28 countries the equivalent to 295 national football pitches. This total reflects an increase of 30% on responses received in our preceding survey in autumn 2014, and expands our long-term survey work to its sixth year. 37% Colocation 25% Design, Engineering and Construction 11% Real Estate Developer / Investor Ireland UK Spain Portugal Denmark Latvia Lithuania Poland Germany Belgium Czech Luxembourg Slovakia France Austria Switzerland Hungary Italy Romania Serbia Bulgaria Greece Turkey 12% Corporate 8% Carrier / Network Operator 7% IT Integrator / Web Hosting For this edition of DC Radar, we will be examining the responses and distilling the key trends emerging from the survey. Following this, we will deliver a series of focussed insight garnered from the survey results that will have significant impact on our sector. These insights will be released later this year and will give you an in depth assessment of trends that will shape the future of how our industry develops. The three major themes that will be developed are those of supply and demand, location and energy. Whilst these should come as no surprise as they have dominated the discussion points in data centre development over the past five years, we have discerned a subtle shift in emphasis and approach.

KEY HEADLINES Of the 4.5 million data centres that are currently operational around the world, 70% of these were deployed prior to 2002, compromised by low power densities, legacy technologies and inefficient power usage effectiveness. According to forecasts by Research and Markets and Technavio, the suggestion is that current stock needs to be increased by up to 20% compound annual growth rate (CAGR) over the next five years. How will this be serviced? What are the current expectations for changes to your 'in-house' technical data centre area? % 80 70 60 50 40 2nd Half 2015 1st Half 2016 30 70% of respondents forecast an increase in demand over the coming 12 months 50% of respondents believe supply stock will diminish whilst 50% think that it will increase Technical space owned and operated by end users diminishing 70% of our respondents who have internally managed facilities have either expanded those facilities or added new ones during the last six months Changing power demands is the key driver in change in third party space Results suggest that the average requirement is to secure a level of around 75% of pre-commitment before construction would commence, a marginal fall on the level recorded last autumn, but well above the long-term average of around 50% monitored over the last six years 70% of respondents believe that future growth in the demand for data centre services will be driven by IT and Cloud Service Providers over the next five years Increased interest in the dynamics of more secondary and tertiary centres (the Nordics, central and eastern Europe) and their ability to provide a solid physical, economic and political platform to deliver genuinely competitive data centre alternatives. Please rank the top three occupiers who you believe will be most responsible for driving growth in the data centre market in the next five years 20 10 0 Expand Downsize Education Professional Services Remain Same Undecided Tertiary Importance Secondary Importance Most Important Government & Public Bodies Retail Data Centre Radar Media & Entertainment Banking & Financial Services RISING DEMAND RISING SUPPLY RISING DEMAND FALLING SUPPLY IT & Cloud Service Providers 0 20 40 60 80 100 Design, Engineering & Construction Corporate Colocation Providers Real Estate Developer/ Investor Other RISING SUPPLY FALLING DEMAND FALLING SUPPLY FALLING DEMAND

THE FOUR PILLARS TO SUCCESS SUPPLY & DEMAND There are mixed messages coming from the data on supply and demand. On the one hand we have 70% of respondents believing that the next 12 months will see an increase in demand With regard to the design & build of data centres in Europe, we believe it is increasingly difficult to source sufficiently skilled Tier 1 contractors to deliver our current projects Design levels whilst on the other hand, recent surveys on the Tier 1 cities have cited that London has over capacity, Paris and Dublin are showing a flat activity level with only Amsterdam and Frankfurt showing strong demand and growth. This position is further Strongly agree exacerbated by forecast reports that construction costs are set to increase by 10-20% CAGR over the next three years and concerns from 55% of respondents that the professional skill sets required for design and delivery are in short supply. Build An underlying theme from the respondents was the anticipation that cloud and cloud-like services will explode fuelling and an increased demand curve, negating some of the flat activity that is being experienced in some locations. Indeed, if we examine the impact of the internet of things, big data, changing work styles and social interaction and patterns we note that this will be primarily underpinned by the cloud or cloud- like services. It has been reported that in 2015, 70% of all workloads will be processed in cloud data centres and cloud data centre traffic will increase four times faster than traditional data centre traffic. Public cloud workload growth rate will be 50% higher than its private counterpart. Predicting that by 2018, 53% (2 billion) of the consumer internet population will use personal cloud storage. This is an increase of 38% (922 million) from 2014. By 2018, more than three quarters (78%) of workloads will be processed by cloud data centres and almost a quarter (22%) will be processed by traditional data centres. Overall data centre workloads will nearly double from 2013 to 2018. However, cloud workloads will nearly triple over the same period. This is against the backdrop that 70% of the current data centre stock was deployed prior to 2002, raising the question of whether such infrastructure will be able to cope with this increased workload efficiently. The other factor noted by our respondents, albeit a minor one, was the impact of data sovereignty laws, 75% agreed that the impact of such regulation would be likely to benefit the more established economies in Europe. Agree Neither agree or disagree Disagree Strongly disagree 70% of all workloads will be processed in cloud data centres in 2015 So what is driving this optimism in the face of such stark market data? If we look at the drivers of demand since 2010 we see a marked change in take up patterns with the traditional mainstay of banking, financial and insurance diminishing in influence and being overtaken by cloud. x4 faster cloud data centre traffic is four times faster than traditional data centre traffic 80 Oil & Energy 70 Banking, Financial & Insurance 60 Outsourced IT 50 40 Corporate The consumer internet population that will use personal cloud storage 2014 2018 922 million 2 billion 50% public cloud workload growth rate up 50% compared to private cloud workload rate 30 Cloud 20 10 Media, Entertainment & Retail 0 2010 2011 2012 2013 2014 Public Sector

LOCATION - where will the demand be based? ENERGY - how will the demand be powered? Whilst the early established markets of the Tier 1 centres have suffered the full brunt of the supply and demand inequalities over the course of the various cycles of the data centre market, they should still remain popular due to their relative maturity, stability, advanced general infrastructure and strong fibre connectivity. However, there is a natural drive in a maturing market to seek new competitive locations that can offer competitive advantage or cost benefits. For instance, those that expressed agreement that Tier 1 locations could come under pressure as a result of rising land costs, were then asked to identify which current secondary or tertiary locations could benefit from this. The issue of power availability and cost has long been recognised as crucial in the decision making process with regard to data centres. Indeed, 80% of our respondents ranked the availability of energy in the top two as the most important driver in the decision making process of deploying a new data centre, with just over half of respondents ranking it as number one. The survey identified that over 80% of our respondents now expect to see a rise in their power consumption in the next three years with around half expecting this rise to be significant. The map shows the primary, secondary and tertiary locations under consideration by our respondents Over the next three years we expect our total power consumption to... Rise significantly Rise marginally Primary Remain the same Secondary Tertiary Fall marginally Fall significantly The EU energy cost trends as published by the European Commission predict relatively stable energy costs from 2020 onwards as the normalisation of the massive infrastructure investments take place. However, they are still predicted to be some 25-30% above current levels. In consideration of the above this represents both a huge challenge and an opportunity for data centre operators. 220.0 10 / MWh 200.0 180.0 160.0 Households A number of Scandinavian locations Finland, Sweden, and Norway - proved particularly popular with 25% of respondents citing them as potential beneficiaries. In addition, Turkey was chosen by 15% of those who expressed a preference, followed by eastern European countries such as Bulgaria, Romania and the Czech Republic. Furthermore, these locations were also cited by respondents as areas that could benefit from potentially cheaper sources of renewable energy. 140.0 120.0 100.0 80.0 60.0 2010 2015 2020 2025 2030 2035 2040 2045 2050 Services Average price Industry Banking, Financial & Insurance

We expect a rise in the cost of power in Europe to increase the demand for power efficient data centre space over the next three years... Therefore, over the next five years, the challenge facing the industry will be one of deploying energy efficient stock on a short delivery cycle whilst taking advantage of available sustainable energy sources. DID YOU KNOW... Strongly agree Agree Neither agree or disagree Disagree Strongly disagree MEET THE EXPERTS If you would like to hear more, please get in touch. Jim Hart Head of Business Critical Systems M +44 (0)7909 682 452 E james.hart@arcadis.com Scott Shearer Head of Service M +44 (0)7810 850 027 E scott.shearer@arcadis.com David Willcocks Senior Consultant M +44 (0)7841 618 512 E david.willcocks@arcadis.com Paul Ryan Senior Consultant, ix Consulting M +44 (0)7971 551 335 E paulryan@ixconsulting.co.uk 128 12,000,000 Diverse portfolio ABOUT ARCADIS ABOUT IX CONSULTING We have 128 dedicated, skilled and passionate data centre experts globally We have presence We have presence across all Tier 1 and 2 locations as well as experience in locations where green energy and free cooling advantages are coming to the fore We have successfully deployed in excess of 12 million ft² of white tile space across the asset life-cycle globally 300 million savings Over the last three years, we have achieved more than 300 million capital cost savings for our clients on both new build and existing asset Our diverse portfolio of clients and projects gives us critical insight into current market thinking, allowing us to accurately forecast market shifts and align our strategies to continue to deliver benefits for the next two decades 100 million savings We have achieved more than 100 million operational cost savings for our clients through the deployment of alternative strategies 50% savings Incorporating our energy management expertise into project delivery, we have implemented sustainable solutions for our clients leading to savings of up to 50% on energy costs ARCADIS is the leading global natural and built asset design & consultancy firm working in partnership with clients to finance, plan and execute strategies that optimise the construction, operation and ownership of mission critical facilities to improve business. ARCADIS differentiates through its talented and passionate people and its unique combination of capabilities covering the whole asset life cycle, its deep market sector insights and its ability to integrate health & safety and sustainability into the design and delivery of solutions across the globe. ixconsulting are a real estate consulting company with a specialist focus on the global data centre industry. Formed in 2001, ixconsulting offer expert, independent, customised research in response to the increasingly sophisticated needs of their clients. Whether a developer, investor or occupier of real estate, ixconsulting provides timely and insightful analysis tailored to your specific business strategy.

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