UK Housing CrunchBy Jay Lyman
This article appeared in the April/May 2005 issue of Web Host Industry Review magazine. Click Here for a free subscription.
April 25, 2005 — (WEB HOST INDUSTRY REVIEW) — As they prepared for April’s Data Centres Europe (datacentreseurope.com) event, European IT companies told consultancy BroadGroup (broad-group.com), in response to a survey, that data center space in London was becoming scarce. At the same time, analysis from the European Information Technology Observatory pointed to a UK IT market growing as briskly as any in the world, aside from China.
While business may be strong for Web hosts and other IT companies, particularly in the UK, could a dearth of data center space be limiting their ability to grow? The good news is that it appears not, according to sources in London such as Steptoe & Johnson attorney Maurice Shenk, whose technology law firm represents one of the United Kingdom’s major hosting players.
“In general, with the UK property markets, rents are low,” says Shenk of data center space. “There really was a glut of space in 2001 and 2002. [Prices] dipped and are coming back up, but it seems like a good time to move.”
Shenk added that while there is a large amount of new office space being built in and around London, there is also a lot of demand for it. Part of the reason, as he explained it, is the desire and need for companies to have local connectivity and proximity to London’s larger bandwidth capabilities.
“A lot of these data centers are valuable because of the local connectivity they provide,” he says. “If you want connectivity in the UK, you’re best off with one of the data centers in London. If it’s global connectivity, it’s probably a decent time to shop around.”
Growing IT companies are not the only ones shopping around, as their customers are fueling strong growth, particularly in the UK, which is leading the rest of Europe, according to a recent market study from EITO.The industry organization indicated that with a healthy four percent growth rate this year, the European information and communications technology market will grow faster than markets in Japan and the US, trailing only China in growth rate. The EITO report says the inclusion of new EU member states will give Europe more than a 32 percent share of the worldwide IT market in 2005. The strongest growth was seen in Ireland and the UK, which had annual growth rates of 6.1 and 4.6 percent, respectively, in 2004. The study also highlighted new member states Poland, and the Baltic States, which are expected to experience 10.1 and 9.2 percent annual market growth respectively this year.
BroadGroup, which surveyed companies participating in the Data Centres Europe conference, set to take place April 28 and 29 in London, indicated the city’s data center market was “close to being sold out for the first time since 2000,” according to a statement from Colocation Exchange founder Tim Anker. Citing data center growth of 30 percent per year in London, conference organizers said the situation might spur stronger growth in other locales that are poised to provide the data center space London cannot. Anker says Amsterdam, Frankfurt and Paris, for example, might stand to benefit from the unmet data center demand.
Web hosts, however, may be able to enjoy the increased IT spending and industry growth without the worry over the data center space shortage, according to BroadGroup founder and director Philip Low.
“From what we understand to date, Web hosting companies will continue to find space within London,” he says. “We don’t believe Web hosting companies are making deals around the 5,000 square-foot and more mark, and thus are not driving the data centers to worry about where to host their requirements.”
Low describes different approaches to London’s reported lack of data center space, stressing that data centers bumping up against space constraints are considering carefully how to expand, whether through new building, warehouse conversion, or takeover. Alternatively, some companies are developing dark fiber provisioning to support sharing between data centers, or using partnerships to fulfill fail-over requirements, according to Low.
While sources say there is definitely momentum back in the European markets, they agree there is also a healthy awareness of reality this time around.
“We believe the market has reached maturity, understands its client base, and is entering a period of strong growth,” Low says.
