Every season, from around November, the online space its packed up with predictions and bets on what’s to come in the year ahead. The data centre space is no different, but often those predictions are correct and overdelivered by a bludgeoning industry. Afterall, this is one of the amazing things about this sector. JSA Media Consultant João Marques Lima takes an in-depth look.
In 2022, the world began slowly to exit the darkest days of Covid-19 but war in Europe stroke alarm bells across the continent. Regardless, the digital infrastructure ecosphere remained at the helm of digitalisation enabling billions of users to communicate, work, and remain safe.
As 2023 approached, it became evident that the coming year was going to be an interesting one. Regulatory changes will become more apparent by the month, full platforms are becoming scarce for acquisition, and the year will also bring with it potentially the biggest financial stress test the sector has endured in two decades – and for data centres, this will be a first. But not all is doom and gloom.
The industry will continue to make palpable advancements on sustainability and coming closer to local communities creating strong circular economy bonds with those who live around digital infrastructure. The regulations, as scary as they might be for some, are key in ensuring a linear and fair advancement in the short and long term. New technology – ok, some of it not so new – like liquid cooling is about to boom, so are different energy sources like hydrogen and even nuclear which is making a robust comeback – and I’m not even going to get into nuclear fusion for now.
For Europe, all this is true. The year of 2023 will be once again exciting and of much learning, especially as the macroeconomic trends seem a bit bleak for the global economy. Regardless, this year will perhaps be mostly earmarked by a truly widespread adoption of more climate friendly technologies, business plans and regulation even if the economic winds blow south.
This is reflected in the intentions of businesses all around as found by a new Gartner, Inc. survey which has revealed that 87% of business leaders expect to increase their organisation’s investment in sustainability over the next two years. Customers are the primary stakeholder group creating pressure for organizations to invest or act on sustainability issues, selected by 80% of executives, followed by investors (60%) and regulators (55%).
Although only representing 27 nations on a continent of more than 44, the European Union (EU) is currently taking a strong lead here with several new changes set to come into place around reporting and measurements of green efforts. To find out more about this, read a previous JSA Europe blog here on what the EU’s next ESG reporting system means for digital infrastructure operators.
Power conversations on the Old Continent have in 2022 taken centre stage at pretty much all conferences off and on screen due to the energy constraints being felt. It is, however, important to remember that Europe, and in particular regions like the UK, were already facing energy production downfalls prior to the war in Ukraine. In the UK, for example, a shortage of wind threw wind-powered energy production to 6% from 25% in 2021. Norway, which is a big supplier to the UK grid, also saw wind production decrease that year. Other sources were also being affected and Brexit caused damage to the power relations between the UK and the EU.
Nevertheless, whilst the past 12 months were reactionary to market constraints, in 2023 these challenges are seen as the new reality. Utility costs, which have grown by as much as 80% in some regions, are expected to remain high with those same costs being passed down to clients. Some developments might also be jeopardised depending on the geography where they are to be constructed, with some projects expected to be revised.
Yet, data centre demand will not subside and will be especially driven by cloud and hyperscale customers. Whilst expansions might get a shake up, capacity will still be built. And this is another interesting shift that we are witnessing: the emergence of new hosting markets beyond the famous London, Frankfurt, Dublin, Paris, Amsterdam, and Nordics.
This year we will see cities like Madrid, Milan, Warsaw, Vienna, Zurich, and Berlin, truly establish themselves as global data centre destinations. Still, site selection will dictate that markets which have before not been on the target line, will gain stronger importance as hyperscale investments push the boundaries of connectivity. Think of places such as Portugal, Greece, Croatia, Romania and some more CEE countries.
We are not only seeing a new phase of market dynamics change with Tier 2 hotspots, but we are also putting the foundations on the ground for the following shift.
Notwithstanding this, do not expect London, Frankfurt, Amsterdam, Dublin, or Paris to just stagnate and fall back. These are Europe’s key markets and will continue to be so for the foreseeable future. Even when faced with barriers to development such as moratoriums, sooner or later a new wave of construction will swipe in as the cities and demand within them, and their financial centres continues to grow.
Growth is precisely the keyword in all this. There are plenty of opportunities of growth, even within the challenges to be faced, that the European data centre sector will certainly be able to circumnavigate in order to advance itself onto a new platform which by 2024 will be larger, bolder, and more equal.