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News Release

London

Data Centre Market More Cautious, But Essentially Optimistic

According to Jones Lang LaSalle's Fifth Data Centre Barometer


Jones Lang LaSalle’s fifth Data Centre Barometer which reveals that the mood in the data centre sector is generally positive with over half of survey respondents recognising that occupier demand is on the rise, whilst supply of appropriate stock is becoming increasingly restricted.
 
Mark Larard, Director in Jones Lang LaSalle’s Data Centre Advisory Group, said: “Deals are happening; they may be smaller, but rents are steadily rising and demand continues.  The development pipeline remains constrained linked in a very tangible way to the lack of speculative real estate finance; whilst this survey indicates that market sentiment is cautious, it is in no way a return to the doom and gloom of 12-18 months ago.”
 
Jones Lang LaSalle’s Data Centre Barometer covers Q2/Q3 2010 and comprises an independent market survey of the data centre industry’s key stakeholders from across Europe, undertaken by the independent data centre consultancy iXConsulting.
 
Mark Larard continued: “The Barometer survey was undertaken in September 2010, before the Comprehensive Spending Review in October, but at a time when the country as a whole was very aware of the impending cuts, and the general uncertainties which surrounded these. Previously we have seen developers preparing their position for the future, alongside third party providers, anticipating a future increase in outsourcing. Unfortunately this cautious optimism has not quite lived up to expectation, with 79% of respondents reporting that they had not altered their data centre holdings over the last 6 months.”
 
Data Centre Barometer 5 poses the question, what has the last 6 months got to show for itself? The report states that large landlord/developer deals of the year all completed, but there is only one, new data centre development which has begun construction. Mark said; “The warehouse retrofit that Virtus in Enfield have started, is a relatively small, but very welcome beacon in the market. Notwithstanding this, the established Technical Real Estate operators continue to let–up their vacant technical space, and supply continues to dwindle. The purchase of the Chesham and Bury Green sites by Matterhorn Capital could prove significant for the market going forwards; between these two sites, they could account for 160,000 – 220,000 sq ft of technical space, which could hold a very critical niche in the market over the next 12 months, unless further developments get underway.”
 
Mark added: “Rumours abound of financial institutions buying vast tracts of land well outside the well trodden boundary of the M25 region for their own data centre development, but to date these remain unproven. Other leading financial institutions have likewise started the process to acquire, but even after close to 12 month (or longer in one rather obscure case) none have actually put their signatures to a contract, but we are apparently close to seeing satisfactory closure on at least four deals.”
 
Mark concluded; “In spite of all of this, the data centre market has continued to tick–over surprisingly well. We may not have seen new wholesale developments starting, but there has been a steady flow of lettings occurring at existing facilities. Where as two years ago, typical leases were on average 20,000 sq ft (technical area), the average for the last 12 months is just over 5,000 sq ft. Despite this shift, the amount of space let this year has outstripped 2009 with ease, and the next 3 months potentially could significantly outstrip 2010 to date!”