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Data Cloud Global Congress 2021: Opportunities for datacenter markets outside of FLAP

June 22 2021
by Mai Barakat


Introduction


Data Cloud Global Congress 2021 took place virtually the first week in June. According to panelists, there are future opportunities in European markets outside of Frankfurt, London, Amsterdam and Paris (or FLAP). These include the Nordics and Africa.

The 451 Take

With an increasing number of enterprises taking on digital transformation, demand for public clouds and SaaS continues to grow. Cloud and SaaS providers, in turn, require datacenter space to support their growth. The top datacenter markets in Europe – FLAP – are all seeing strong datacenter demand from these players, but large-scale sites are increasingly required outside of these markets, in places such as Dublin, Madrid, Marseille, Milan, Warsaw and Zurich.

At the conference, attendees also noted increasing demand for Nordic sites, which have positioned themselves as go-to locations for sustainability, as well as in certain markets in Africa and the Middle East. With an increasing number of enterprises looking to the cloud, and cloud providers themselves looking to add availability zones in new markets – e.g., in order to appeal to clients that want their data to remain in-country – we expect the demand for datacenter facilities in markets outside of FLAP to continue to grow.

Europe: state of market


Demand in Europe continues to be ahead of supply, and hyperscale take-up is leading the way, but mobile carriers using the cloud and offering it, the finance sector moving to the cloud, and telecom operators using and offering the cloud have also been key factors in pushing growth. The manufacturing industry has been key as well, as enterprises in that sector continue to digitalize processes.

The pandemic accelerated growth from hyperscalers, as well as fiber development across the FLAP markets, according to panelists. Obtaining construction permits has been challenging, and there have been some issues with the supply chain for datacenter equipment. But for the most part, construction was not dramatically delayed and most panelists agreed that more megawatts of power will be rolled out in Europe this year than in the past few years, with strong demand from hyperscalers, and edge, AI and 5G developments. According to data from 451 Research, net UPS power in Europe as a whole is set to grow at a CAGR of 11% between 2020 and 2023.

According to one of the participating datacenter providers, the colocation market in Europe is about half the size of that in the US. This is in line with our findings that shows the net UPS power for Europe at 5,300MW at the end of 2020, compared to the US ending 2020 with 8,400MW. Outside of the FLAP markets, hyperscale demand is starting to pick up significantly. This is mainly due to the adoption of the cloud by enterprises across Europe, and improvements in infrastructure outside of FLAP.

Another participant saw the most growth in Eastern Europe (Poland and Russia) and Switzerland due to the low costs and the climate, which allows for more efficient cooling systems. According to 451 Research, Poland, Norway and Sweden will see a CAGR of 13%, 11% and 14%, respectively, between 2020 and 2023. Panelists also argued that they saw very strong development in the Middle East and Africa, with the cloud heavily gaining traction and growth in local and international colocation.

The Nordics


According to datacenter providers at the conference, ideal climate, reliable infrastructure and good power in the Nordics makes a case for future growth there. According to one panelist, the region has had $400m in investment in submarine cables, and has a strong focus on renewables. In addition to the cables already in place and under construction, three more projects are being planned. The Celtic Norse cable will connect Trondheim in Central Norway to Killala, Ireland. The Leif Erikson cable will run between Husnes in Western Norway and Goose Bay, Canada. And the Arctic Connect cable will run between Kirkenes at the northernmost tip of Norway and Hokkaido, Japan.

The combination of sustainability and low-cost power is very appealing, because it makes the Nordics a region that is cheaper to invest and be sustainable in. In Denmark, there are large-scale projects coming in from firms such as Microsoft, which is planning to build three datacenters, and DigiPlex, which has expanded with a new greenfield datacenter, as well as other colocation providers over the next five years. Google, Apple and Facebook are also developing in Denmark.

In Sweden, Microsoft is building 15 datacenters with 24,000 square meters each. Near Stockholm, Hydro66 has filled 20MW so far, and is expanding this year to 40MW, with 80MW expected next year in the north of Sweden. In Norway, AQ Compute is developing a 10MW leased datacenter just outside of Oslo with a focus on high-density computing, while Basefarm is expanding its datacenter in Oslo, adding 6MW.

The Nordic markets have successfully created a business environment friendly to datacenter development. The governments encourage foreign investment in the country and municipalities in the region are considered to be efficient and relatively quick in granting permits compared to southern Europe.

Africa


Since IBM entered the African market in 2016, cloud providers have been eyeing the region. As of 2020, Microsoft, Azure and AWS have all launched availability zones in Africa. This has triggered more rapid growth, with South Africa the most high-volume market, followed by Nigeria and Ghana, according to panelists. There is also growth in Kenya, Egypt and Morocco. The 2Africa subsea cable project, connecting Africa to the UK, France, Italy, Spain and Portugal, will enable increased connectivity levels, and growth in digitalization has pushed the demand for datacenters on the continent.

Over the last year, there has been strong development in Lagos, Nigeria. The country has established a free trade zone, which one panelist said can be a key feature in attracting investment into the datacenter market. In Lagos, Africa Data Centers is developing large-scale facilities, with the cost of development at $100m. The Kenyan market is developing a very mature contracting base and skilled construction network to allow for growth, and Egypt has had strong foreign direct investment, as well as new projects focused on smart cities, which will drive uptake.

While each African market has its own unique challenges and opportunities, one key common challenge across the continent is the infrastructure, in terms of roads, communications and electricity. However, there is significant potential for growth, due to a young, growing population, increasing GDP and increased digitalization.

Panelists expect to see momentum in datacenter investment and growth here. Time will determine how steep the curve is, but there is significant capital to invest in the African continent. And while there has so far been cautious growth in Africa, with providers instead focusing on Europe where it is easier to develop datacenters, the opportunities are expected to lead to more rapid growth over the next few years.