Data centre market reboots after dotcom crash

The specialist data centre market, which collapsed after the dotcom crash and undermined the fortunes of specialist fit-out contractors, showed strong signs of recovery last year with prospects for further growth in 2005, according to a report published this week.

CB Richard Ellis (CBRE), a quoted property services company, found that take-up of space rose 25% in 2004, compared with 2003. It also found that London dominates the European market, outstripping capitals on the Continent. It accounted for 397,000 ft^2, or 71% of total take-up. Frankfurt took second place with 84,000 ft^2.

The picture the CBRE report paints contrasts strongly with the market two years ago. The collapse of the IT and telecom sectors after 2000 led to troubled times for UK data centre operators such as Global Switch.

The upturn follows increased confidence in the banking, financial services and corporate sectors, which use data centres, or server farms, to outsource data storage and processing.

The report said: “Looking ahead to the first quarter of 2005 and the year as a whole, we expect demand to grow at a progressive rate and supply to remain relatively static.”

According to CBRE, more than half of the space taken up in London in 2004 was leased in the fourth quarter, a traditionally busy period.

CBRE predicts that the speculative development of data centres could start by the end of this year.

Damien Kenny, managing director of Mace’s fit-out arm Como, backed up CBRE’s predictions. He said that as the market improved, he expected to see an increase in the number of data centre operators, and therefore clients to the construction industry.

We expect demand to grow at a progressive rate and supply to remain relatively static

CB Richard Ellis report

BT, has already drawn up a programme to create 150 hubs across the UK using old telecoms exchanges.

“We feel that it is an area that is going to grow,” said Kenny. “All the indicators are there that facilities are being filled up.” He added that he expected to be see “mega data centres” developed in the next 18 months to two years, whereas occupiers at the moment were still taking space in facilities built in the 1990s.

Data centre fit-out accounts for about 50% of Como’s business. In January it hired Steve Root from Bellwater UK after the firm went into administration in the same month.

“We saw data centres as a market that is going to grow, and Steve had experience,” said Kenny.

Data centre development is a niche business, and within the UK has been focused on London and the South-east. “Most of the corporates want data centres to be fairly close at hand but not within the main headquarters,” Kenny said.

According to the CBRE report, take-up and development would continue to be strongest in outer London, in areas such as Docklands. Further development could increase to the west of the city, as a result of a good supply of power to the area, and road and air accessibility.