OVER $1.3BN OF DEVELOPMENT FINANCE IS REQUIRED TO DELIVER THE FORECAST NEW COLOCATION SUPPLY IN THE EUROPEAN FLAP MARKETS DURING 2018
462mn required to fit-out new supply in London alone during 2018
2018 is on course to beat the annual colocation take-up record
Spurred on by record take-up for colocation in the major European FLAP markets of Frankfurt, London, Amsterdam and Paris, both developers of data centres and investors have been extremely active in the first half of 2018 according to new research from CBRE, the world's leading real estate advisor.
This confidence in the durability of the FLAP markets is evidenced by a record amount of new supply coming to market in H1 and significant high-profile M&A activity, including the acquisitions of Evoswitch and Data4, and further investment in Global Switch,
The FLAP markets grew in size by 95MW in H1 2018 and CBRE forecasts another 82MW will be delivered in H2. This total of 177MW of projected new supply in the year will require over $1.3bn of CapEx to fit-out and deliver. The need for a significant amount of finance provides investors with an opportunity to access the sector through the development route as well as allowing developers to benefit from a low cost of capital to fund projects, given the competition amongst the investor community for each opportunity.
The four major European colocation markets were responsible for 51MW of take-up in Q2, bringing the H1 total to 87MW, a record first-half for any year. London and Frankfurt were responsible for over 30MW of take-up each in H1 2018 as cloud companies again dominated activity in the European markets.
Investors continue to be drawn to the data centre asset class because of the incredible growth of the European market. As opportunities for M&A are scarce, investors are utilising more creative means to deploy capital in the sector and development finance is one avenue open to them.
Society’s reliance on digital devices and cloud services, and consequent need for data storage and processing, will only increase as the world gets smarter and more connected. CBRE’s Portfolio 2040 research estimates suggest the amount of data that Internet of Things devices generate each day is doubling every 40 weeks; the effects of this are very evident in data centre activity in Europe.