Where does the UK fit within the European Data Centre Landscape?

Transcription

1 Where does the UK fit within the European Data Centre Landscape?

2 QUESTIONS 1. Is this a buyers market with more than 25% unsold capacity can we expect a bonanza of low price deals? 2. Some operators are struggling to sell their space Telecity and Equinex merger What else from an M&A perspective is on the horizon? 3. DIGITAL Realty Wholesale REIT now selling colocation Vs Equinex Retail going to a REIT selling Wholesale Where will it end is there any difference do we care? 4. Has the UK lost its shine against mainland Europe? Should this be a European event? 5. Data centre impact of Asia Alibaba? 6. Opportunities and threats 2

3 QUESTION 1 Is this a buyers market with more than 25% unsold capacity can we expect a bonanza of low price deals? The overall vacancy rate across the FLAP markets is 20% of total supply. London s individual vacancy rate of 25% doesn t seem excessive. However, one must consider the actual figures: London s amount of vacant space, 78MW, shows a vast amount of oversupply when considered alongside other markets. European Market Absorption EUROPEAN AVAILABLE SUPPLY (MW) London Frankfurt Amsterdam Paris Amsterdam London Frankfurt Paris Will this affect pricing? It already has. Real market pricing in London reached historic lows in 2014 and has not greatly picked up since. Though real market pricing has flattened out at the low end, the sense is that pricing will dip even further especially when a tenant is seen as strategic. 3

4 QUESTION 2 Some operators are struggling to sell their space Telecity and Equinix merger what else from an M&A perspective is on the horizon M&A activity has been a major theme in the European landscape in Significant deals include: NTT e-shelter (86.7% : approx. $840m equity) Equinix Telecity ( 3.6bn :Acquisition) St Telemedia Virtus (49%) Digital Realty Telx ($1.9bn : Acquisition) Infinity Vertus / Data4/ Vodafone? The sector is at an all-time high for investment activity and this has driven prices to historically high levels. Notwithstanding this, high barriers to entry and the capital intensive nature of the business are keeping investors interested and so we ll see more M&A activity before the end of the year. Why? Operators are looking to consolidate their position in European markets and expand their networks Firms can move up the IT stack and offer a wider range of solutions 4

5 QUESTION 3 DIGITAL Wholesale REIT now selling colocation Vs Equinix Retail going REIT selling Wholesale where will it end up is there any difference Wholesale & retail colocation models have become blurred, e.g. Digital Realty purchase of Telx for the interconnectivity & cloud platform,. NTT buying e-shelter, STT buy Virtus. Aggregate size of take up has fallen with CBRE research showing 200kw-400kw becoming the more common deal size in the market. This means wholesale operators have started chasing smaller deals normally placed into retail operator platforms. Conversely, we have seen retailers securing wholesale style pre-lets at new UK facilities - Ark. Demand size has become smaller due to increased virtualisation, improved server technology meaning higher power per server but smaller numbers & mixed IT architecture driving more services to managed service or cloud platform. Where will it end? More M&A activity. Wholesale & retail definitions irrelevant. Solutions led clients less interested in mechanical & electrical system more interested in connectivity and ecosystem present in facilities. 5

6 QUESTION 4 Has the UK lost its shine in mainland Europe NO The UK did take a back-seat to Amsterdam in 2014 and Frankfurt in Q but has come back with a bang in Q Take up at the Q mark is 11.3MW higher than any other European market at this stage. London s 8.9MW transacted on Q was the highest figure for quarterly take-up in any European market for 15 months. Traditional European powerhouse The gap in demand between London and other major European markets has narrowed in recent years, but London s overall dominance continues. London 5-year average for annual take-up is considerably higher than its rivals and the market and London has shown strong powers of recovery when challenged. Substantial new supply generates interest London Resurgence from traditional corporates An indication of the overall market confidence in London is supported by the launches of two major new facilities in H Equinix LD6 and IO s London facility. This could be further supplemented by Gyron s Hemel Hemsptead campus in Q4. Migration from IT Infrastructure sector Yes, this could indicate further oversupply, but it shows market confidence. 5-YEAR AVERAGE FOR TAKE-UP London Frankfurt Amsterdam Paris

7 QUESTION 5 Data centre impact of Asia Cloud Traffic Growth by Region, in Exabytes (Sourse:Cisco) REGION CAGR Asia Pacific ,010 1,368 1,802 2,331 37% North America ,102 1,384 1,701 2,077 26% Western Europe % Source: Cisco Analysis, 2014 In 2013, North America generated the most cloud traffic followed by Asia Pacific By 2018, Asia Pacific will generate the most cloud traffic Western and Eastern Europe don t compete: Is Europe Still Relevant? Unlocking China Opportunities: Access to China storing data in China Being ahead of the curve IaaS Platforms Challenge Techno-political landscape Local storage security Developers seeing better IRR in Asia 7

8 QUESTION 6 Opportunities and Threats to London market OPPPORTUNITIES Global financial centre resurgence from traditional corporates Main EMEA HQ for corporates maintaining market position Largest colocation market in EMEA attracts snowball effect Highly competitive market more choice (+ & -) Future migration of cloud providers towards London (from Amsterdam & Frankfurt). THREATS Too many competitors market is oversupplied (- & +) EU membership uncertain destabilising medium-term MNC strategy Pricing LOW Power more expensive than other EMEA locations Technology companies often using Ireland & Amsterdam as EMEA landing points bypassing London 8

9 Thank you