The European datacenter landscape finds itself in a sticky situation. Recent market data from CBRE reveals that major datacenter hubs in Frankfurt, London, Amsterdam, Paris, and Dublin – often referred to as FLAPD – are grappling with vacancy rates that have plummeted to an all-time low, falling below 10% for the first time. The surge in demand for capacity has outpaced the available supply, creating a deficit of available power and suitable land for datacenter builders.
During the first half of 2024, a staggering 155MW of datacenter capacity was claimed, while only 138MW of new capacity entered the market. The shortfall has left providers struggling to keep up with the growing demand from hyperscale cloud and internet giants, particularly those from the United States seeking more space to expand their operations.
In the “western corridor of London,” where the only development occurred in the second quarter, adding 30MW of new capacity, the situation is dire. The rest of the primary European markets did not receive any new datacenters, although 28MW of supply was delivered to the 10 smaller, secondary markets that CBRE tracks.
The report from CBRE also anticipates that London’s take-up rates will surpass those of other FLAPD regions, except for Frankfurt, in the coming year, with a projected 130MW of take-up in London due to new facilities emerging in the western corridor, catering mostly to hyperscale clients.
Unfortunately, the supply constraints are not expected to ease any time soon. CBRE forecasts a decrease in vacancy rates to 7.9% by the end of the year, marking the fifth consecutive year of declining vacancies. This is likely to cause a ripple effect on pricing as the competition for datacenter capacity becomes more fierce.
The challenges in the Dublin market are particularly alarming, as the city currently holds the title of the world’s third-largest hyperscale datacenter market. The looming threat to this position is linked to the difficulty that operators are facing in securing power in the region, potentially jeopardizing the market’s long-term growth prospects.
Despite these challenges, there is a glimmer of hope for the London market. The government has pledged to relax planning restrictions on new datacenter builds in an effort to bolster the country’s economic outlook.
While the current power supply constraints present an obstacle, CBRE anticipates an increase in European colocation capacity in the second half of the year, offering a glimpse of potential growth in the future for the datacenter industry.
This complex situation presents a tale of growth, struggle, and adaptation in the digital age, with potential impacts on housing developments, regulations surrounding power availability, and the ever-increasing demands of tech giants. It’s a narrative that captivates the imagination and unfolds in a series of challenging yet promising chapters.
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