It was a great honour to be asked to speak at LINX105 at the end of May this year. This is the fourth time I’ve been asked to present to this hugely knowledgeable and experienced audience. While the aim of my presentation was to summarise some of the dramatic changes we’ve seen in the London data centre market over the past 20 years (especially those that had taken place since my previous presentation to LINX in November 2015) I also took the opportunity to bring the audience up to date on where we are today.
My review of the past was designed be a bit of fun. For example, I included some slides from my Band-X days showing the price per Megabit of London IP Transit at around the £250/Mbs-per-month mark – you can easily pick up a full Gigabit for that cost today! But it’s the changes over the past four years that proved the most informative, so that’s what I am focussing on here.
In this article:
London Colocation Market since Q4 2015
I wrote a Colo-X Newsletter in the fourth quarter of 2015 with the heading Are we at turning point for the European colocation industry?.
The reason for posing this question was that despite the well-founded concerns regarding ‘Equicity’s’ dominant market share, the Equinix/Telecity deal had just been given the go-ahead by the European Commission, and coincidentally at almost the same time one of the leading wholesale price aggressors, Infinity Data Centres had just signalled a significant change of strategy by selling their new 15MW Slough facility to Virtus.
Like many of the so-called wholesale operators at this time, in order to gain any sort of traction Infinity had rapidly scaled down their target customer size from large wholesale only, i.e. clients wanting 1MW or more to pure retail, that is one rack at a time. So, at a stroke Q4 2015 effectively saw two retail colocation options removed from the market and the years of what had essentially been a buyer’s marketcame to an end.
Some of my previous articles about this buyer’s marketphase can be found on the Colo-X website, but the key feature of this period leading up to these two transactions in 2015 was the price compression that we saw between the best pricing available for retail colocation buyers, i.e. those buying racks and the pricing available for the few large-scale, wholesale clients which had become very narrow indeed. A great time if you were buying colocation, with operators from all parts of the market, i.e. both wholesale and retail, keen to win your business.
And it’s worth remembering that it was these tougher years, especially when business confidence was low during the Euro crises, that lead to both of these transactions in 2015, with the ultra-competitive retail colocation market forcing Telecity’s originally proposed merger with Interxion in March 2015 (a very defensive move in my opinion) and also had to be a factor why the investors behind Infinity deciding that they’d had enough and it was time to withdraw. Well – how things have changed!
Significant changes to the London data centre market from 2016 onwards
As shown by my graph below (derived from CBRE’s London Annual Data Centre take-up figures) demand in the London market has more than doubled, indeed nearly tripled in 2018, from the typical 15-25MW annual totals that we saw prior to 2016.
CBRE estimate total data centre take up in 2018 was 77MW and the staggering nature of this surge is that CBRE estimate some 80% of the 2018 total was driven by the large hyperscale cloud providers (e.g. Azure/Microsoft, AWS, Google Cloud). Or looking at the figures the other way, hyperscale cloud take-up was 62MW and the rest of the market only some 15MW, a typical figure for the entire London market prior to 2016. This suggests that the underlying market has continued as before, just now overshadowed by the excitement taking place in the wholesale sector.
Besides this unprecedented surge in demand the equally impressive feature of the past few years is that somehow the market has delivered. In other words, supply has matched or exceeded demand, as can be seen in the following graph:
Hyperscale demand is shifting both the distribution and balance of the London data centre market
Two further effects of the hyperscale demand in London over the past few years have been that we’ve seen a significant shift in the London colocation market away from its historic roots based around London Docklands (due to the opening of Telehouse on Coriander Avenue in 1990). As my own Colo-X London data centre data base shows, the majority of growth in capacity is now occurring in London’s M25 market and indeed I suspect once the next few facilities open that the M25 market will soon have twice the capacity of the Central London market. A marked contrast to the situation ten years ago when almost all the UK data centre capacity was clustered in London Docklands.
Indeed, if you look at the graph below you can see that total capacity in Central London has hardly increased at all, with capacity inching up from 1.3m sq ft to just over 1.5m, some 200,000 sq ft. This has largely come from Telehouse West (50,000 sq ft, opened in 2010) and of course North2 (70,000 sq ft, 2016) Interxion Lon2 and more recently Lon3 (40,000 sq ft in total), Volta in Farringdon (45,000 sq ft) and then extra capacity in HEX, now Equinix LD8. On the other hand the M25 market has gone from just under 500,000 sq ft to now nearly 2.5m sq ft.
Of course, the huge hyperscale focussed deployments have driven wholesale focussed capacity to finally overtake that of retail to leave the London market made up of 54% wholesale operated capacity and now only 46% retail, compared to a 48/52% split back in March 2010 and we can expect this trend to continue, if not accelerate given the expectation of continued strong hyperscale deployments to come.
The other feature that I pointed out in my presentation is the sheer scale of the new facilities that we’re now seeing. The numbers are really impressive, with Virtus’s new Hayes campus the largest so far, with 104MW of new capacity either built and live or under construction. My table below highlights a few of these monster new campuses:
|Virtus LON5/6/7/8||Stockley Park, Hayes||100MW||LON5 & 6 40MW opened 2018, LON7 live in 2019, LON8 to come|
|ARK 101-105||Farnborough, HANTS||50MW||Buildings 101-104 live, 105 now under construction|
|e-shelter/NTT||Dagenham||32MW||Two buildings, first opens 2020. Scope to double to 64MW|
|Kao Data||Harlow, Essex||32MW||First 8MW building live, 3 more to come|
|Iron Mountain||Slough||30MW||Former Credit Suisse data centre and second new site on Buckingham Avenue|
|Global Switch||Docklands||15MW?||Upgrading floor space from sub 1kW/square metre to modern standards|
In terms of the schemes listed above Global Switch may seem a bit of an anomaly being the existing two buildings adjacent to Telehouse. These are both pretty old facilities now and I think Switch North, or London 1 which opened in 1999 was only built to 500W/sq m while the newer (relatively speaking) and much larger East building (opened 2002) to only 733kw/sq m. Switch are now beginning a programme of upgrade works; when a suite sold on a long-term lease is vacated, you can double or triple the IT power load by replacing chillers, UPS etc and bring the area up 1.5 or even 2kW/sq m that is more typical of modern facilities. The first such upgrade is now underway in the North building delivering 2.6MW at 2kW/sq m and we can expect more of this to come over time.
Given the sheer scale of the two Global Switch buildings (65,000 sq m) the potential new capacity is huge, let alone the proposed new “South” building that could add yet further significant new supply. The key aspect to unlocking this potential has been the new company ownership, with the company now majority owned by a Chinese investment consortium and clearly in a much more expansionist mind than the ultra-conservative approach of the previous owners. However, the impact of last week’s news that the company’s planned IPO has now been shelved has yet to be seen or understood.
Yet more (American) new entrants to the London data centre market
The final part of my presentation focussed on a number of new entrants arriving into the London market, all of which American and offering further new locations and options for London data centre buyers.
I have already written about zColo and Iron Mountain arriving here in the UK back in January this year, with both companies acquiring previously privately owned and occupied data centres. For zColo it was the former T-Systems data centre in Feltham (4MW) whereas Iron Mountain acquired the Credit Suisse data centre on the Slough Trading Estate and which will eventually offer 15MW of customer IT load. The company are also intending to build a second facility on Buckingham Avenue to provide nearly 30MW across the two sites.
CyrusOne, another huge American operator with 45 sites around the world announced the USD$442m acquisition of Zenium at the end of 2017, with the deal closing by the end of the summer of 2018. In London Zenium had 22MW of capacity available across two sites, their first being on Liverpool Road, Slough Trading Estate and the second a further asset sale by Infinity data centres (see above) of their Stockley Park site (7000 sq m/13MW). CyrusOne have since announced a further smaller LON3 site, also on the Slough Trading Estate, intended to offer 9MW of IT load across 4000 sq m. Continuing with the “huge” theme CyrusOne claim to have plans to build 500MW of data centre capacity across Europe, including existing schemes in Frankfurt and new ones for Dublin and Amsterdam.
Finally, Edgeconnex will be yet another new name in the UK market in 2019. Interestingly the company lists both London and Manchester on its corporate website but as yet with little details. Somewhat contrary to the generally perceived concept that “edge” data centres will be small, well connected regional facilities thus far in Europe Edgeconnex have launched two wholesale schemes, 55MW in Amsterdam and thus far smaller Dublin site of 6000 sq m.
Impact for retail colocation buyers
My final table below highlights the entries into the Colo-X UK data centre data base since the fourth quarter of 2015 that I mentioned at the start of this review. 18 new facilities have been opened in the UK market to date since then, 9 of which we describe as retail focussed and 9 from wholesale operators, providing just over 1m sq ft of net technical capacity in total.
The retail capacity comprises 270, 000 sq ft or 50MW. The bulk of this comes from Telehouse (North2) and Equinix (LD6) but its interesting to note the number of facilities opening in the regional UK market such as the impressive new Datavita site near Glasgow, AQL5 in Leeds, (underpinned by the JISC North contract) 6Degrees in Birmingham, Indectron in Gloucester and then finally in the south east 4D’s Gatwick facility and ServerHouse’s 400 rack Fareham site.
In the wholesale sector its just under 750,000 sq ft or 150MW and seven of these sites are in the M25 market, part of the trend outlined earlier in this article, but two are regional UK, GTP3’s Birmingham site (whose anchor tenant is 6Degrees) but also Stellium in the north-east.
Entries in the Colo-X UK Data Centre data base since Q1 2016
|Data centre||Address||Year Opened||Net tech sq ft||IT Load MW|
|Telehouse North 2||Coriander Avenue, London,E14 2AA||2016||70,000||15|
|Gyron Hemel 3 Ph1||Maylands, Hemel Hempstead, HP2 7TN||2016||100,000||20|
|AQL 5||Canon House, Apex Way, Leeds, LS11 5LN||2016||7,500||4|
|Six Degrees Birmingham Central||Palmer Street, Birmingham, B9 4EX||2016||10,000||2|
|GTP3 Data Centres||Palmer Street, Birmingham, B9 4EX||2017||30,000||5|
|CyrusOne Lon 1/Zenium||Liverpool Road, Slough, SL1 4QZ||2017||60,000||9|
|4D Gatwick||17-19 Kelvin Lane, Crawley, RH10 9EY||2017||10,000||2|
|Datavita Glasgow||Fortis Datacentre, Unit 1, York Road, Chapelhall, ML6 8HW||2017||50,000||10|
|Stellium||Cobalt Park Way, Newcastle, NE27 0QW||2017||45,000||20|
|Kao Data Park||London Rd, Harlow CM17 9NA||2018||150,000||36|
|ServerHouse Fareham||14 Brunel Way, Fareham, Hampshire, PO15 5TX||2018||10,000||2|
|Indectron||Shield House, Barnwood, Gloucestershire, GL4 3DH||2018||20,000||2|
|Interxion Lon3||Dray Walk, London, E1 6QL||2018||20,000||3|
|Virtus LON5||Horton Road, Stockley Park, West Drayton, UB11 1HB||2019||110,000||24|
|Virtus LON6||Horton Road, Stockley Park, West Drayton, UB11 1HB||2019||75,000||16|
|Equinix LD7||1 Banbury Avenue Slough SL1 4LH||2019||70,000||10|
|Iron Mountain LON1||724-729 Dundee Avenue, Slough, SL1 4JU||2019||120,000||15|
At Colo-X we help colocation buyers with needs from as little as quarter rack up to several racks, 10-20 or perhaps up to 100kW of IT load is a larger deal for us, but we occasionally stray into bigger. But the good news for retail colocation buyers is the continued growth of new names amongst the operators focussed on smaller clients and new locations that they are now offering as listed above.
Colo-X continues to be extremely active in the dozen or so key colocation ecosystems in the London market (and which I highlighted in my presentation to LINX, as its these facilities where LINX members tend to congregate and connect to each other) and we regularly close business with Telehouse, Equinix and DRT for example, but there is increasing awareness that these usually very expensive facilities are not the only option, especially where the application does not need access to multiple connectivity partners. Indeed, even within this specialist part of the market there are still enormous differences in costs for rack space, power, support and especially cross-connects. It’s definitely worth doing your homework (or consulting an experienced broker of course) before taking the plunge.
For colocation buyers who don’t need ecosystem access then there are now a broad range of good quality facilities and operators across the UK market who are totally focussed on supporting retail colocation buyers and indeed many have the ability to offer a combined bundle of colocation, network and crucially, high quality on-site support. We typically expect to see non-ecosystem colocation costs at around half the cost of the expensive sites, so again proper market due diligence can be very worthwhile.