Are Regulations and Market Conditions About to Drive a Colocation Boom in Europe?

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A combination of new regulations and a tight colocation market may be about to spark an enterprise rush to colocation and cloud.

Commercial data center availability in Europe is tight. Greater reporting requirements from the EU that will require reporting of data center operations and the broad regulatory regime of the Corporate Sustainability Reporting Directive (CSRD) are coming into effect. These regulatory factors will bring the data center operations of many large corporate enterprises and commercial operators into scope with requirements for granular reporting of sustainability impact.

The EU’s latest regulatory move was March 2023’s “Assessment Framework for Data Centers in the Context of Activity 8.1 in the Taxonomy Climate Delegated Act.” This was generally interpreted as shifting the EU Code of Conduct from guidance to a reporting requirement. 

Any enterprise scale organization operating a data center in Europe, be it in finance, manufacturing, process, healthcare, infrastructure or even tech and cloud has much to assess in a changing regulatory environment.

This raises two fundamental questions:

i.  Why don’t I hand over my data center operation to a specialist?
ii. What is stopping us as an enterprise taking the flight from risk and regulation?

The answer to the first question is Why indeed?

For the second answer one possible barrier may be that in enterprises there exists poor visibility into what is under management across the IT and data center estates.

Some evidence for this emerged at a recent CBRE webinar on Europe’s colo market. When asked whether more EU regulation would act as a brake or an accelerator in driving enterprise take up of cloud and colocation, the panelists’ answers were illuminating.

 One replied: “With more regulation one could argue that more compliance equals more cost so [more regulation] is not a brake or inhibitor.”

Another panelist, a managing director for infrastructure at a well know management consultant said: “It is an accelerator. The barrier is understanding what you have got. In terms of moving, what we see as being the biggest stumbling block, before organizations begin their move to hybrid cloud, is understanding what they have. From an application perspective, hosting, servers, and understanding the interfaces and interdependencies between systems – a lot of upfront work in cloud migration is around discovery. When moving to public cloud or colo – your knowledge of your estate – the power consumption, water, and space become far more accessible.  Especially from an ESG view in enterprise, most organizations don’t really know what they have, don’t really know what they are using and what they’re spending on. Given tighter regulations, we can expect to see more enterprises look to adopt practices from colo and cloud providers for reporting rather than do it themselves.”

The EU Regulatory Environment

With the EU Code of Conduct already here but a change in its wording is being seen as moving it from reporting guidance to a reporting requirement. CSRD, from which no-one is exempt, is coming (see below).

Europe’s colocation market

Q1 2023 reports and forecasts from JLL and CBRE show demand and supply growth in the FLAP+D and tier II markets such as Warsaw, Milan, Zurich and Madrid.

CBRE’s Q1 reports FLAPD market take up of 440MW (+ 16s% YOY) of total supply of 3,303MW, vacancy at 13% (+3 YOY).

Speaking at the recent Tech Capital Investing in Change Forum, JLL’s Tom Glover said take up in 2022 was London 78.4MW; Dublin 42.6MW; Paris 46MW; Madrid 9.9MW; Amsterdam 29.9MW; Berlin 64MW; Frankfurt 98.9MW.

Glover said: “We’re now seeing more pre-lets in the industry than ever before. Roughly 438MW in 2022 [in Europe].” 

Across Europe’s commercial data center market vacancy rates are low.

Enterprise moves

CBRE reports that in colocation take up, ‘the bulk of demand across Europe is accounted for by the three largest Hyperscalers.’ It says this is followed by strong demand among technology services firms (SaaS and PaaS). OTT media companies are moving directly to colocation as are financial services firms due to regulatory and privacy needs, it says.

Serverfarm understands that all migrations are testing and all enterprise migrations from on prem data centers to colocation and cloud are complex undertakings.

For reporting purposes, any enterprise looking to move to colo would do a lot worse than opting for a commercial data center operator who can provide data center management as a service (DMaaS) as standard. Moving to such a management platform begins with an audit of existing assets.

Serverfarm’s approach to data centers is a unique combined offering of expertise, world class data centers and a DMaaS platform and service designed to ease the journey.

Not all colocation options are the same.

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