I wasn’t able to post a comment when I saw last week’s press release (http://bit.ly/TC5SZG ) from respected telecoms industry analysts Telegeography as I was at the Eco Data Centre Summit in Nuremberg (and what a good event that was).
However, I thought it was most interesting to at last see one of the analysts present a more balanced view of the colocation industry supply/demand picture.
In their 2011 Colocation Database report Telegeography reported “demand for retail colocation is growing relentlessly” and that “vacancy rates fell sharply from 2010”. They did go on to note though that colocation operators were “scrambling to build new sites”. Well the fruits of all that effort would appear to have been arriving over the past 12 months.
In this year’s report Telegeography are reporting that vacancy rates are rising, with colocation vacancy rates in London for example increasing from 17% to 28% in the year to September 2012. Yet despite this jump in availability Telegeography also report that nearly 70% of the respondents to their survey in London say “they will continue to add colocation capacity in anticipation of steady demand”. Apparently a very similar picture emerges in Los Angeles, demonstrating that the situation in London is happening in other major data centre markets. The balance to this growth in supply is that Telegeography report demand “remains strong”.
So, “here, here” we say at Colo-X – we strongly agree with this much more balanced picture of the colocation industry and how nice to see the industry experts finally catching up with our views. Where our views still probably differ from Telegeography’s is that they think the rising vacancy rates are down to one or two specific new openings, whereas we feel the improved supply situation is from a much wider base.
At Colo-X for some time now we have argued the supply pipeline of colocation capacity remains as healthy and visible as we can recall, in other words we can see a steady stream of new capacity from the large operators, eg Equinix, Telecity, Interxion or Telehouse. But on top of this we also see that we have meaningful capacity from numerous new entrants – for example in the UK this would include Gyron, Pulsant or central London’s Volta – and the picture is the same across Europe, look at the Dutch market (and see footnote below on the German market). Finally, we also have the wholesale sector offering their product in a form that looks increasingly like a colocation product. So a good supply pipeline, from all parts of the market, not just one or two new facilities. We also concur that demand is there – the long term drivers remain intact. So yes, a healthy, balanced market and certainly not an industry experiencing a supply-side crises (such as we saw in 2007 for example).
As ever we advise colocation customers to start thinking more about how the data centre market is segmenting into different price points. Some expensive and premium facilities exist whilst others are offering exceptional value, often at half the price per kilowatt or less. So definitely time to stop thinking of the industry as one homogenous group and only pay for expensive kW where you need to (eg to access high carrier connections or achieve low latency) and start taking advantage of better value facilities where you can.
As a footnote to this BroadGroup analyst Marion Howard Healy presented an overview of her recent report on the German Data Centre Market. She reported in Frankfurt alone there is some 2 million square feet of potential supply – enough surely enough to keep that market well stocked for the foreseeable future. More details on the report can be found here: http://bit.ly/RcQgPr