Issue link: https://cp.revolio.com/i/141720
the economic factors that are dampening demand Tenant demand is steady and measured levels of new capacity are still being brought online to keep pace.. As the financial capital of Europe, London is the largest – and one of the most expensive – data center markets in Europe. Constraints on power, connectivity and availability have a significant impact on pricing. While price growth has remained relatively flat, average wholesale deals in the major European markets currently range between $190$235 per kilowatt per month gross, roughly 10-20% higher than rates in the U.S. Continued strong demand from the technology and media (TMT) sector has triggered new data center supply in Amsterdam and Frankfurt. Germany's economy is currently one of the strongest in Europe and Frankfurt is serving as a focal point for data center growth. The early 1990's adoption of internet and broadband technology positioned Frankfurt's internet exchange point (DE-CIX) to become the largest in the world based on peak incoming data rate. Amsterdam also boasts one of the most network-rich locations in Europe, home to one of the highest densities of international fiber with direct access to several submarine cables that allow for lowlatency global connectivity. Market headlines in 2012 were dominated by real estate-driven mergers and consolidations among data center providers in multiple markets across Europe Digital Realty acquired a 761,000-square foot portfolio from Sentrum for nearly $1.1 billion – the three UK-facilities in the transaction were approximately 80% leased, providing both an existing income stream and available leasing capacity for the provider. Other transactions included Equinix acquiring Frankfurt-based ancotel GmbH, NTT purchasing an 85% stake in UK-provider Gyron and Telecity acquiring Finland operator Tenue Oy with an eye towards boosting their growth potential in the Nordic region and access to Russia and Baltic countries. Asia: operator expansions fuel strong growth and pricing The Asia-Pacific region continues to serve as the growth engine for the global www.datacenterjournal.com economy and appears to be gathering momentum after a brief slowdown in the second half of 2012. The most established data center markets in Asia are those that serve as global financial centers and have the highest concentration of multi-national firms, including Tokyo, Hong Kong and Singapore. However, the broad Asia-Pacific region continues to see a rapid expansion of its data center market, as providers continue to look for entry points to capture the extraordinary demand potential in these emerging markets. While Asia currently accounts for more than 45% of global internet users, market penetration still stands below 28% (compared to 79% in the U.S. and 63% in Europe). Additionally, India and China together account for 30% of the world's mobile users – nearly 2.0 billion subscribers (compared to 322 million subscribers in the U.S.). By these metrics, the Asia-Pacific market is still significantly under-supplied and pricing in the region reflects this imbalance. According to West, "While rents vary dramatically market to market – moreso than in other global regions - average wholesale deals for the Asia-Pacific range between $240$360 per kilowatt per month gross , in upwards of 25% above prevailing rates in the U.S. Colocation prices average a similar multiple to that of other regions – typically 2.0-2.5 times that of wholesale rents". Hong Kong is the most mature data center market in the region and serves as a gateway to both China and the broader Asia-Pacific region. Real estate restraints make data center expansion a challenge and dwindling supply is putting pressure on utilization in current facilities. There is virtually a zero percent vacancy rate for industrial buildings and land in Hong Kong, although the government is putting forward two hectares of land for data center development in the Tseung Kwan O industrial district for competitive bidding later in 2013. Singapore competes with Hong Kong as the most desirable location in the region with a well-established data center market with existing infrastructure that can handle both connectivity and power demands. Several global providers are actively exploring expansion and entry in to the market as a hub for regional expansion. International data center operators have found accessing China a challenge due to a confluence of factors. Data center facility design in both Beijing and Shanghai lag behind more mature markets in the region and power constraints in major hubs serve as significant barriers to entry. The "Great Firewall of China" – an internet filtering system originally designed to control information being exchanged through news feeds and social networking sites – often erroneously interrupts cloud services and causes significant delays when connecting outside of China as everything travelling over the public internet domestically must pass through it. Private network traffic can pass in and out of China without having to pass through the firewall system, but access to private networks are tightly controlled by incumbent Chinese carriers China Telecom and China Unicom. As such, demand from multi-national firms looking for strategic partnerships – ranging from western operators with a presence in China, local joint venture partners or central or provincial government entities – is very robust. Late last year, Microsoft engaged in a strategic partnership with 21Vianet, China's largest carrier-neutral data center provider. The provider will be licensed to operate and offer Office365 and Windows Azure in the country and began construction on a massive 452,000-square foot (gross) facility in the Daxing District of Beijing to service demand. n About the Authors: Sean Brady is the Senior Director and Co-Founder of Data Center Advisory Group and Jeff West is the Research Manager and Director of Data Center Research. Cushman & Wakefield's Global Center Advisory Group includes the real estate industry's most experience advisors within this highly specialized asset class. Focusing on Greenfield, industrial conversions, wholesale, collocation, managed services, Cloud, and corporate data centers and disaster recovery sites. The group includes 30 brokers ,business continuity and crisis management, incentives and location consulting, cost segregation, appraisers, project and facility managers, and currently manages more than 20 million square feet of mission critical space. Contact Sean Brady Senior Director at 201 460 3342 or by email at sean. brady@cushwake.com. THE DATA CENTER JOURNAL | 11