Flagging vacancy rates and dwindling availability in popular European data center locations are pushing providers into new areas, with firms looking to explore secondary markets in an effort to bolster portfolios, according to new research.
A recent study from CBRE showed “double-digit” growth in supply is expected in 80% of Europe's ‘secondary markets’ such as Berlin, Brussels, Madrid, Milan, Munich, Oslo, and others.
These markets are outside of the primary ‘FLAPD’ regions, which includes Frankfurt, London, Amsterdam, Paris, and Dublin. All five of these primary markets across Europe are currently experiencing a rapid decline in available space.
The report expects the availability of data center space and vacancy rates to fall for the third consecutive year in FLAPD, owing to a shortage of stock necessary to “meet strong hyperscaler demand”.
Though availability is still falling in Europe’s secondary markets, it is falling at a much slower rate than in FLAPD.
Data center providers look to “augment and complement”
Surging data center demands mean many providers are turning their attention to alternative regions in a bid to both diversify portfolios and ramp up capacity.
“Four of the most pressing challenges for data centers are power, real estate availability, sustainability and the ability to build facilities which are AI ready,” said Christina Mertens, vice president of business development, EMEA at VIRTUS Data Centres.
“There is a need to look beyond the FLAPD markets to ‘secondary’ markets if the industry is to satisfy these demands,” Mertens told ITPro.
As Mertens stressed, though, it’s important to bear in mind that data center providers are not abandoning the FLAPD region, but rather expanding into other regions in order to bolster their positions.
“Data center providers are not ‘moving out’ out of the FLAPD zone. Instead they are exploring and building new sites within these ‘secondary’ markets to augment and complement existing market locations,” Mertens said.
Europe’s secondary market ecosystem is not a silver bullet for the problems raised in data center location selection; rather it offers the possibility of expansion in Europe to data center providers.
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“Data center providers and customers still see value in the FLAPD zone, but the development and growth of AI and the unique requirements which AI workloads demand, make new markets necessary to support hyperscale and enterprise customer needs,” Mertens said.
According to the CBRE report, cloud providers also have a part to play in the push towards secondary markets, as these firms are increasingly looking to deliver services to markets from “in-country, as opposed to in-region”.
Europe’s secondary markets have a lot to offer
Aside from simply enhancing access to space, many of Europe’s secondary markets also lend themselves data center development in other ways.
According to Doug Loewe, CEO at Kao Data, secondary market locations are often well suited to data center construction projects, owing to an abundance of suitable locations.
“Cities such as Berlin, Greater Manchester, and Brussels, for example, have many brownfield and ex-industrial sites ripe for sustainable modernisation,” Loewe said.
Loewe also cited the importance of technological resilience, explaining how secondary locations can often become a “plus one” to primary locations, such as in the case of Marseille to Paris, or Berlin to Frankfurt.
