BroadGroup European Colocation Overview

January 13, 2017

Colocation market in Western Europe will grow to ~€13.5bn in 2020

2016 was an interesting year for the colocation market in Europe. From M& A activity, to new build and the impact of cloud on colo business models, the changes we began to see last year will shape the landscape of the industry in 2017.

It is difficult to talk about the market in 2016 without understanding that cloud changes everything. Much focus has been on the demand from cloud, and particularly hyperscale cloud, players which constitute up to 75% of the demand in some European markets. However, the impact is much broader, from future usage of co-location facilities to new delivery models to competitive positioning.

In previous years, many co-location players benefitted from simply having availability in the right location, but cloud is accelerating the disparity between winners and losers. Size is not everything, but having a global footprint and cross-selling opportunities is clearly a major advantage. We are also seeing more success from providers with a more focused and differentiated approach, particularly where they can show real business benefits to their target market.

From the investor perspective, while it is positive that there is growing acceptance and understanding of data centres as an asset class, and different types of investors who are interested in the market, many of the investors have the same concerns and reservations. This will continue into the new year and it is vital that players looking for investment have their business model and strategy written in line with investor expectations.

2017 is shaping up to be another strong year for the data centre market. Overall, we believe the co-location market in Western Europe will grow to ~€13.5bn in 2020, with a CAGR of ~11%.
There are a number of fast growing technologies which will need to be housed in data centres. AI (Artificial Intelligence) and VR (Virtual reality) are great examples of potential future drivers for the data centre market. The VR market is estimated at $117bn by 2020 – growth of 75% a year 2016-22 – and AI at an incredible $3,000bn by 2025.

The deployment of 5G mobile technology is set to create over two million jobs and generate EUR 113.1 billion a year of benefits for the European economy by 2025, according to a European Commission supported study.

The seventh annual BroadGroup Consulting Western European Data Centre, Hosting and IaaS report, 2015-2020, analyses 19 countries and key trends, providers and user issues in the market, contains over 70 figures and detailed analysis by country and also gives valuable insight into ensuring your business model is attractive to investors. For further information on the report contact: steve.wallage@broad-group.com

Steve Wallage, BroadGroup

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