London is leading the charge in European data centre boom

Data centres are making a comeback in the property market, with 2005 seeing demand for “technical real estate” hitting record levels. The second quarter of 2005 saw a continuation of the upward trend in the take-up of data centres across Europe, according to a new report from CB Richard Ellis, with supply significantly up in London. The firm predicts that demand will keep increasing at its current pace, leading it to reach 600,000 sq ft for the year.

During the second quarter there was more than 111,000 sq ft of take-up in Europe’s five main data centre hubs: Amsterdam, Frankfurt, London, Madrid and Paris.

The first quarter of 2005 saw even more impressive growth, with the second-highest quarterly take-up over the last three years at 180,000 sq ft.

Correspondingly, data centre vacancy rates are relatively low.

In London, the vacancy rate was at 33.5% in the second quarter of 2005. In Amsterdam, Frankfurt, Madrid and Paris the vacancy rate decreased to 42.5%, 48.3%, 50.2% and 33.3% respectively. (See graph).

The report also says that for the first time in three years London has seen an increase in the supply of data centres where the operator allows any carrier to connect to the facility – so-called carrier neutral hotel (CNH) stock.

Significantly, the second quarter of 2005 saw Outer London’s first speculative CNH data centre for three years coming online.

These were not bad signs, according to the report, since vacancy rates in London had reached four-year lows. It said that the Outer London market had reached saturation, which reduced the risk of speculative development in the area.

The addition of space in the London market has highlighted a need for high-specification buildings with significant power availability, according to CB Richard Ellis.

The shortage of technical real estate in the city is being exacerbated by the lack of shell properties – empty buildings suitable for conversion into data centres – of more than 30,000 sq ft. These buildings have already been snapped up by large corporates, which acquired them cheaply after the dot com bust.

Meanwhile, demand from smaller corporates requiring areas of 10,000 to 50,000 sq ft has grown due to the increased use of IT.

CB Richard Ellis’ European Technical Real Estate report also found that there was a shift in the source of demand in Europe, which is moving away from corporates and towards technology companies, both established firms and start-ups.