CB Richard Ellis reports significant decline in take-up in the European data center market (EUR)

Take-up in the European Data Center market reduced significantly in Q1 2009, according to the latest quarterly report by CB Richard Ellis (CBRE), European Data Centers, which has monitored the worldwide Carrier Neutral Hotel supply since 1999.

Overall take-up in Q1 2009 was only 11,020 m² across the five tier 1 markets which represents a quarter-on-quarter reduction of 80% from Q4 2008.

The predominant reason for the decline has been a decrease in demand in the Shell market which in 2008 was on average 12,022 m² a quarter, in Q1 09 there were none.

Andrew Jay, Head of Technology Practice Group, CB Richard Ellis, said: "CBRE has been forecasting a fall in single let Shell transactions since early 2008. This is a result of both the downturn in the economy, which has had a huge impact on these highly capital intensive projects, and investment banks redeployment of their footprints over the last two years."

All of the 11,020 m² take-up was in the Carrier Neutral Hotel (CNH) market. Third Party Retail operators accounted for 6,220 m² (56%) of this take-up, which was roughly half of the average quarterly take-up in this sector in 2008. Third Party Wholesale operators accounted for the remaining 4,800 m² of take-up, which represents 69% of the quarterly average in 2008. Notably, there was not a single third party wholesale transaction in London in Q1.

Andrew Jay, continued: "The lower levels of take-up in the CNH market combined with the difficulties in the Shell market indicate that total take-up for 2009 will be considerably lower than that of 2007 and 2008. In the medium-term however, the prognosis should be relatively healthy. The underlying demand drivers for IT usage and associated processing power continue to grow. This is evidenced by the relative growth in take-up from the technology sector, whose market share has increased from 7% in 2004 to 26% in 2008. As such, we feel that the market is well placed to grow once there is a recovery in the wider economic climate.

"We are seeing occupiers becoming far more cost conscious and this may lead to requirements for reduced specifications, albeit still at high power densities. As such, the relative cost of power in the total cost of ownership equation increases, and this will lead toward a drive for greater efficiencies in terms of PUE and how the data center space is operated. Greener is definitely cheaper in the data centers market and the imminent introduction in the UK of the Carbon Reduction Commitment will have a significant impact on the data center industry."

In Q1, CNH stock rose across Europe by 3,430 m² to 623,010 m². The increase was due to the introduction of a new facility in Paris. Of the total stock recorded this quarter, 443,970 m² (71%) was fully-fitted space and 179,040 m² (29%) was shell and core space.

Total stock was apportioned across the five Tier 1 cities as follows: 260,610 m² (42%) was in London, 177,020 m² (28%) was in Frankfurt, 85,870 m² (14%) was in Paris, 63,160 m² (10%) was in Amsterdam and 36,350 m² (6%) in Madrid.

Compared with the same quarter last year, total stock has increased by 49,340 m² (9%). This was due to a number of new facilities in London, Amsterdam and Paris.

Andrew Jay, said: "Following sustained growth amongst carrier neutral colocation providers during 2008, the first quarter of 2009 saw only a few announcements of expansions or planned new facilities across the European markets. This reduction in pace of activity amongst Europe's main colocation providers will not come as a surprise to the industry, taking into account the strong growth in space witnessed over the last few years and set against a background of world economic hardship. Indeed, the lull in activity may be welcomed by those who had concerns about the amount of new stock announced across both tier one and tier two locations."

He concluded, "Given the likely restricted levels of demand throughout the rest of the year, a note of caution is necessary in terms of supply. Operators and developers will need to tailor their

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