Summary

The Europe Data Center Colocation Market size is estimated at USD 16.99 billion in 2023, and is expected to reach USD 31.59 billion by 2028, growing at a CAGR of 13.21% during the forecast period (2023-2028).

The market studied has been growing rapidly, with new entrants and data centers being increasingly constructed in the region. The necessity of space and utilities has also increased to unprecedented levels with the expansion of businesses. Also, shrinking IT budgets and economically infeasible requirements make it hard for companies to operate their data centers. This is also driven by the rising concerns regarding the capital investment and expenses associated with building and running a data center.

Key Highlights
The regional market is also driven by the significant demand for colocation services by the hyperscale data center consumers, including large internet businesses and public cloud service providers. Besides building massive data center facilities in remote areas, major cloud service providers such as Facebook, Microsoft, and Google have been leasing tons of capacity from the colocation companies in densely populated areas across the European region.
The FLAP (Frankfurt, London, Amsterdam, and Paris) regions have become significantly mature and face limitations related to physical spaces and insufficient energy to power these data centers. Such issues have driven the colocation providers to find new feasible locations, including Oslo, Berlin, Zurich, Milan, Warsaw, and Madrid. These areas are considered potential regions for data center construction across the region.
To lower their CAPEX and OPEX, conserve data center space, and lower cooling system power usage, data center operators are searching for effective solutions. Europe has colder climate conditions. Therefore air/water-side economizers and indirect evaporative coolers will still be used there. Many establishments strongly favor free cooling chillers that provide partial cooling using outside air. For instance, the London 1 data center facility owned by NTT Global Data Centers (e-shelter) has free cooling and N+1 redundancy of water-based cooling systems. Depending on the facility design and IT load, the investment in cooling systems for data center projects is anticipated to be between 15 and 20 percent of the total cost.
There are many European standards and regulations for data centers; it's easy to see that non-compliance with the stringent rules and regulations does not involve a single, easily understood consequence but hundreds of ramifications. On a legal front, a data provider that fails to meet the standards and keep up with compliance may be punishable by law, which could involve shutdowns, fines, and much more. That's not including their responsibilities to customers and clients who may or may not also take legal action. The GDPR holds data controllers (the organization that owns the data) and data processors equally liable (outside organizations that help manage that data). A non-compliant third-party processor means the organization is not compliant.
The data center sector has been changing for a long time, but the last several years have been particularly challenging, owing mostly to the COVID-19 pandemic. At first, it may have appeared that all the changes were being made to accommodate stay-at-home orders temporarily, but that is no longer the case. The surge in remote school and work, making business calls on Zoom instead of the phone, and utilizing an app for everything seems to be a permanent trend. The fast growth of online activity has raised the demand for data center white space, particularly in recent years, as the COVID-19 pandemic made access to internet applications a requirement. With more people relying on the internet for work, social networking, e-commerce, banking, and entertainment, the demand for almost limitless uptime and storage capacity is growing.

Europe Data Center Market Trends

Tier 3 is the largest Tier Type

The tier 3 segment currently has a majority of share in the European region due to the major advantage of its features. These tiers have a high redundancy level and multiple paths for power and cooling. These data centers have an uptime of around 99.982%, translating into a downtime of 1.6 hours per year. The increasing adoption of edge and cloud connectivity is expected to boost the segment's growth.
The United Kingdom hosts the maximum number of tier 3 data centers in the country, with Slough and Greater London holding a major share. The other major locations are France, Germany, Ireland, and other countries. Dublin is the only region that hosts more than 98% of the tier 3 data center facilities in Ireland, with North and South Dublin holding a major share. The tier 3 segment is expected to grow from 7,979.69 MW in 2023 to 12,110.18 MW in 2029, with a CAGR of 7.20%.
The tier 4 segment is expected to record the highest CAGR of 15.51% during the forecast period. Various developed countries are focusing on adopting Tier 4 certifications to get the advantage of complete fault tolerance and redundancy for every component. Thus, even the developing regions are adopting the tier 4 zone. For instance, the tier 2 metro markets, outside the traditional FLAP markets, are set to see the fastest capacity growth from a low initial starting point. In particular, the Barcelona, Milan, and Rome metro markets are expected to triple the amount of data center power over the next four years.
Tier 1 & 2 types showcase the least majority growth as more than 70% of all traffic today moves from server to server. Modern applications require significantly more data to travel within a data center at faster speeds and are more particular about latency.

United Kingdom is the largest Country

The largest data center markets are covered by FLAP-D metro markets (including Frankfurt, London/Slough, Amsterdam, Paris, and Dublin). With the increasing adoption of digital services and power management, these countries are expanding their colocation facilities. In August 2022, the Greater London Authority announced plans to change the application process for data center development to tackle and ease the West London power crisis with better electricity management regulations.
The land price in London is around USD 150 per sq. ft. The higher land cost in London is expected to shift investments to other cities in the industry with lower land prices. For instance, Amsterdam has a lower land price for building facilities in the FLAP-D data center market, which is USD 38 per sq. ft. The Spanish market has many third-party DC projects under construction, with facilities being developed in Madrid and Barcelona.
In terms of renewable energy, in the FLAP-D market, renewable energy is majorly produced from solar, wind, hydroelectricity, marine and wave energy, and bioenergy. For instance, in April 2022, the French government announced a strategy for renewable energy innovation projects as per its 2030 national investment plan, with an investment of over USD 1 billion.
As the FLAP-D data center hubs observe a lack of land availability and skilled workforce, they are under threat from emerging regions. Countries like Italy, Poland, Belgium, and Sweden are expected to showcase growth in the future. Sweden's data center market is one of the most connected locations in the Nordic region regarding subsea cable connectivity. The country has adopted the district heating concept for data centers.

Europe Data Center Industry Overview

The Europe Data Center Market is fragmented, with the top five companies occupying 25.33%. The major players in this market are CyrusOne Inc., Equinix, Inc., Global Switch Holdings Limited, NTT Ltd. and Vantage Data Centers, LLC (sorted alphabetically).

Additional Benefits:

The market estimate (ME) sheet in Excel format
3 months of analyst support

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