London colocation market on course for record-breaking year of take-up, CBRE data shows

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London colocation market on course for record-breaking year of take-up, CBRE data shows

The insatiable appetite of cloud service providers for colocation space in the capital means 2017 is shaping up to be London’s best-ever year for datacentre take-up, CBRE research shows.

The real estate consultancy’s latest European datacentre market tracker suggests demand for colocation space in the capital is holding firm in the face of Brexit, with 40.8MW of take-up recorded by the end of the third quarter for 2017.

To put this figure into context, at the same point of the year in 2016, the London market had seen 28.7MW of power taken up in the market, prompting CBRE to predict the capital could be on course for a record-breaking year.

“We expect Europe’s largest market to surpass its 2016 record total of 49MW as the fourth quarter takes shape,” the report stated.

In terms of what is driving the demand for colocation space in London, CBRE attributed the markedly higher levels of consumption on the activities of the cloud service provider community.  

“London is expected to benefit from further cloud demand in the coming quarters. Demand will continue to be driven by the US tech companies and we expect to see the first moves into the market from the major Asian, predominantly Chinese, cloud and telecommunication companies,” the report added.

The CBRE quarterly report specifically tracks the colocation market activity seen in Frankfurt, London, Amsterdam and Paris (Flap), and – according to its collective year-to-date figures – the level of take-up recorded across all markets is at all-time high of 85.7MW.

The European colocation market, overall, has seen another busy year of mergers and acquisitions (M&A), the third quarter data confirms, which CBRE said has caused a surge in average take-up rates across Flap.

“Only two years ago, a total of 15MW of take-up per quarter was considered the par across the four markets,” the report said. “However, over the past eight quarters we have seen an average of 32MW per quarter.”   

According to CBRE, the colocation market is a difficult place for newcomers to establish themselves in, and many find adopting a buy and build strategy to be an efficient way of overcoming some of these challenges.

“For a new company, having experience developing and operating datacentres can be invaluable. This coupled with the need to develop an ecosystem, making gaining successful entry into the sector difficult but rewarding,” the report stated.

“As demand for datacentre capacity in Europe continues to grow and consequently drive consolidation, the pool of available target companies and assets becomes smaller.

“This will intensify the need for prospective investors to act quickly and decisively if they are to deploy capital in the sector. With this in mind, we expect more significant transactions in the coming months.”

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