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Demand for data centres in major European cities to rise by a third in 2021

JLL forecasts 21% increase in new data centre capacity with 438 MW to be added to established markets this year.

JLL’s Data Centres report reveals that increased cloud migration and technology adoption drove unprecedented activity in the data centre industry in 2020. Take-up in Europe’s main data centre markets of Frankfurt, London, Amsterdam, Paris and Dublin (FLAP-D) increased 22% yoy reaching 201.2 MW (megawatts), with this pace of growth expected to continue for the rest of 2021. This year alone, JLL forecasts 438 MW of new supply being added to the FLAP-D markets, a 21% increase on the total market size.

Despite a slow start to 2020, enterprise colocation demand picked up in the second half of the year across Europe. Take-up in London increased 72% with 87 MW seen throughout the year. Frankfurt also had a record year for absorption with 69 MW of deals and 124 MW of headline signings. And significant growth in new supply placed Frankfurt as the largest mainland colocation provider in Europe.

“Widespread lockdowns, social distancing, and home-based working have transitioned many everyday activities from the physical to the digital. This has boosted demand for digital infrastructure, including data centres with many organizations needing to accommodate elevated consumer demand and expectations like never before,” said Jonathan Kinsey, Head of EMEA Data Centre Services, JLL. “The growth of Europe’s data centres will continue to accelerate, largely driven by hyperscalers and technology players and we project that take-up will rise by around a third in 2021.”

The construction pipeline in Europe is also expected to see significant growth following record levels reached in 2020. Frankfurt will lead with 119 MW of new supply, following the 83 MW new inventory added in 2020. The Paris market is forecast to have 71 MW of new supply in 2021, having grown by 72 % over the last four years. Amsterdam will benefit from 53 MW new supply following a subdued 2020 owning to restrictions on data center development, which were lifted in July. London set a record number of planning applications in 2020 and is forecast to see 133 MW of development. As the smallest of the main European hub colocation markets at 161 MW capacity, Dublin has a huge self-build market with over 670 MW of hyperscale data centers and is expected to see 62 MW of new supply this year. When combined with the colocation supply, this makes Dublin the largest market in Europe.

Data centres have been one of the top-performing asset classes in REIT markets around the world since the onset of the pandemic. A growing number of investors are now hunting for defensive strategies, and the surging online demand has boosted the resilience of data centres.

“In 2021, we expect to see traditionally non-data-center investors and developers actively explore opportunities in the sector either to back start-ups with good management teams, or in some form of M&As and partnerships,” commented Tom Glover, Head of Data Centre Transactions, EMEA, JLL. “Demand in major European markets has continued to outstrip supply and the opportunities to enter the market will be varied. Most investors tend to focus more on the hyperscale segment, given its scalability.”

With investment in the expansion of 5G technologies by communications service providers and sustainability, including a focus on improving data centres’ energy efficiency and carbon footprint, playing an increasingly crucial role in development, activity in the sector shows no signs of slowing.

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