Colo-X attended the 7th Data Centre’s Europe conference last week (5/6th May) and the highlight for us had to be the fascinating leadership panel.
On the panel were representatives of Telecity, Equinix, Interxion and Global Switch, the four largest pan-European carrier neutral colocation providers, together with e-shelter, who currently focus on Germany and Switzerland and Colt, the only carrier operator on the panel and who have significantly stepped up their data centre operations over the past year, as signified by the recent appointment of Bernard Geoghegan, formerly President of Digital Realty Europe. The panel probably represented 90% of the pan-European carrier neutral colocation industry.
Industry’s own plans prove new supply is possible
One of the key themes from the panel was that colocation or data centre capacity is still supply constrained, for example as specifically mentioned by Mike Tobin, CEO of Telecity and Fabrice Coquio, MD of Interxion France. Yet in a direct response to our question about this idea Tobin admitted Telecity’s own announced expansion programme would see the company’s capacity almost double over the next few years from the current 58MW to 107MW, adding some 30,000 sq m of space. In fact if you looked along the panel, every single participant has not only been opening significant capacity of late but all have publically announced major expansion plans. So what are we meant to believe; that it is in fact possible to bring on new capacity or not? Or is it just that the established operators are the only one’s able to bring on new supply and no one else can?
Tobin explained the challenges of bringing on new capacity, especially in the space and power constrained central city hub locations and that it’s about a 3-4 year process to bring a new site into production and this sounds fair enough. But there’s no doubt in our view that the major operators are now very much on top of managing their supply pipeline these days. This is exactly the point we heard from Eric Schwartz, VP of Equinix Europe in his presentation to Data Centre’s World last year, which we also reported on (follow this link).
New Entrants continue to bring on new capacity
To illustrate the point that meaningful new supply is coming into the market, I shared a panel later that same day with Alex Rabbetts from Migration Solutions, whose new subsidiary Sentry42 is opening a 35,000 sq ft net tech facility in Norwich this week. It was also a pleasure to meet at the conference Aidan Paul, CEO of Vtesse Networks, who have recently opened a 30,000 sq ft facility in Hoddesdon, Hertfordshire. And because we were at the conference last week we were sadly unable to attend the opening of Node4’s new 60,000 sq ft facility in Northampton and indeed this week, whilst we are exhibiting at Internet World, we won’t be able to attend the launch of the new Virtus facility in Enfield, which will add a further 30,000 sq ft of new capacity. In addition to these retail colocation offerings last week also saw the announcement from Matterhorn Capital about their two new schemes north of London, offering a further 180,000 sq ft of wholesale capacity across two location. All this tiny snapshot of activity in a market where apparently no one can build!
Colo-X view remains that the supply/demand picture is in healthy balance
I have posted my presentation to the conference on the Colo-X downloads section. Our view on the market remains that whilst occupancy overall is indeed quite high, the supply pipeline is as clear as its been for some time. We can see that the big operators all have meaningful expansion plans and can therefore offer capacity today AND looking forward. Even in the premium Central London market, where we estimate occupancy is currently at 93%, there will be 60,000 sq ft of new capacity opened this year, the best year for new capacity in this market for some time*.
In addition to the large and established operators plans and as illustrated above, we have continued new supply from new entrants and finally, we continue to see capacity from wholesale sources being offered on a retail basis, either directly from the wholesale operators themselves in the form of “wholo” (again, read our piece on Digital Realty’s activities in this area) or via resellers. With significant capacity available from the wholesale operators this is quite a pool of potential supply for the industry and quite frankly is usually at quality that is hard to differentiate from what the established operators can offer.
UK market now made up of two distinct markets with significant choice emerging
Colo-X also maintains the view that the UK colocation market is now falling into two distinct markets. There is an expensive premium market based on facilities located in London Docklands and the City, or Central London, and everywhere else, including facilities located around London or further afield. Retail colocation pricing in the Central London market is the highest in Europe on a per kW basis at around £600 per kW per month but away from this there is a significant price range allied with the significant choice in facilities, locations and operators. Away from Central London pricing ranges from £500 to as little as £200 per kW per month, often for directly comparable capacity. Of course Colo-X is perfectly placed to help any colocation buyer analyse the options now available. There is no doubt that for those colocation buyers wanting access to significant connectivity options the Central London market is the obvious choice, but for more general users, for instance a typical enterprise customer (and we are seeing growing interest from this sector) there is no need to pay the premium Central London prices and instead they can look at the wider choices available elsewhere.
*STOP PRESS: Telecity announce a further 3MW of Docklands capacity in today’s management briefing! Full statement via this link. Telecity will now be bringing on 6MW of new Docklands capacity.