The market for data centre construction is estimated to be valued at just over £1bnin 2015, following 3 years of market consolidation. The performance has been variable in recent years, with construction demand affected by an oversupply of data centre resources in the co-location sector, followed by a period where the surplus capacity has been used to soak up modestly increasing demand. The effects of the government’s data centre consolidation programme are also contributing to the variable market performance.
Output in 2015 was generally relatively poor as the economy faltered somewhat and the government started the process of streamlining their estate, while the wholesale and co-location sector came under pressure from having too much available space. The private data centre construction market has also been relatively subdued in recent years, though since 2014 there have been greater levels of confidence in investing in business infrastructure. The increase in political stability and the improvement in the economy coupled with more projects getting underway in the latter half of 2015, have led to a more positive outlook for 2016.
The government owns a large amount of data centres and as such has a significant influence on the replacement and maintenance sector of the market. While commercial developers, such as co-location providers, account for a significant share of new builds due to their large scale and the high specifications, the majority of the existing data centre estate belongs to private businesses.
The largest geographical UK data centre cluster remains in the London and M25 area, though there is growth outside of this region, with large campus style data centres established in areas such as Wiltshire, Leicestershire, South Wales and Cambridgeshire. There is a trend of migration from London to regional areas as the data centre pricing varies by geographical data centre cluster, with London & M25 area average pricing significantly higher than the UK average.
Energy efficiency is a key driver of market performance. The effects of improving energy efficiency in data centres can be seen immediately, bringing the additional benefit of substantial savings on operational costs, and this has driven demand for modular solutions, from rack-based solutions to complete data centre pods and containerised solutions. Ever increasing levels of online activity, and changes in the way online services are delivered with a growing interest in cloud computing technology, are also driving demand. However, increasing ‘cloud’ take-up might shift the emphasis on data centre construction to the commercial and co-location sector away from the privately owned sector.
Data centre construction is emerging as a significant sector in its own right, and one key trend seen in recent years is that of integrated service offerings. While most large M&E contracting businesses are key players in this market, companies involved in data centre construction range from major building contracting groups and commercial developers, to data centre specialists and operators, modular building manufacturers and IT equipment suppliers. It is likely that further consolidation will take place among operators, specialists and construction/ engineering firms in the near future, as the market remains extremely fragmented and characterised by a large number of new entrants and small market shares, even among the leading players.
“Recently, there have been growing concerns about data sovereignty and the ‘safe harbour’ ruling, something which is likely to lead to greater levels of storage of data in the UK and Europe by large scale US corporations.” said Keith Taylor, Director of AMA Research.“At the end of 2015 a number of major projects have been announced which will be implemented across 2016 and 2017, in particular the large scale data centres for Amazon Web Services and Microsoft, and these together with other major programmes should provide some impetus to the market in the next year or two.”
Indications are that construction output within the data centre sub-sector will rise from 2016 onwards driven by a general improvement in the economy and the improved performance of certain end use sectors as well as the underlying factors driving greater IT and internet usage. That said, the high levels of vacant space and the trend towards data centre consolidation, particularly in the public sector, are likely to lead to relatively modest overall growth. Consolidation is likely to remain a continuing theme, something which will lead to larger contract sizes and may affect the market for replacement and maintenance negatively in the longer term. By 2020, the data centre construction market is forecast to have increased by 9% overall, though there is likely to be volatility within the forecast period.
The ‘Data Centre Construction Market Report - UK 2016-2020 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling +44 1242 235724.
If you would like to receive further information or wish to speak to an author of this report, please contact Anna Eriksson on +44 1242 235724 or email firstname.lastname@example.org. Please include our web address and telephone number on any review printed, and it would also be appreciated if a copy of the review could be forwarded to AMA Research. Thank you.