More cloud means more data centers
The digitisation of the economy that has been accelerated by the pandemic has also been driving the demand for the development of large data centres in Poland. The driving force behind this demand are large-scale centres (hyperscale and wholesale) and their tenants – cloud service providers, most of which are provide publicly-accessible clouds, says Oliwer Goliński, Data Center Expert at 7R.
An increasing number of large data centres are being planned in Poland. How important is this segment of the real estate market?
More and more players are now entering Poland to open such facilities. Data centres are a form of industrial real estate and their server rooms are an important part of the global infrastructure, thanks to which internet users can access data stored on servers, process them and use applications that employ the computing power they enable.
For the last two years or so, the expansion of large-format data centres on the Warsaw real estate market has been gathering pace. Several large data centre operators have already started construction in the capital, e.g. in the districts of Włochy and Bielany. In 2020, two of the three largest cloud providers in the world – Google and Microsoft – decided to launch what are known as cloud regions in Warsaw. Microsoft also intends to provide the entire Central and Eastern Europe region with cloud services from Poland. These decisions are then followed by the development of the specific infrastructure that is required – large-format data centres located in Warsaw.
Who are the tenants and buyers of data centres?
The data centre market can be broken down into three main segments. The first type, traditional retail type facilities, have a relatively smaller area, offering a co-location model for the servers that allows many diverse customers to rent space for their devices in one building. They suit companies that, for various reasons, decide not to use cloud-based solutions. This segment is a mature market and is characterised by relatively low growth dynamics compared to others.
The second type are wholesale centres, which also offer server co-location, but to much larger clients. Due to the specific nature of such facilities, their construction is often adapted to the needs and preferences of end-customers who will use them for many years.
The third type are hyperscale centres, which work in a similar way to wholesale facilities, with the difference that they are suited to only to a narrow, but very important, group of customers – the largest global cloud providers, such as Amazon, Microsoft and Google. The number of players in this segment is very small and is actually less than not exceed a dozen companies globally, but their demand is growing at a tremendous rate for such infrastructure, in proportion to the demand for their services.
How will this demand develop?
For many years, the demand for cloud services and IT outsourcing was growing organically, as was the consumption of digital services of every kind. The pandemic has further accelerated this trend, prompting a massive shift towards remote working, digital entertainment, online relationship building and digital public services.
Cloud services offer a wide range of benefits to users, so their popularity is only expected to grow into the future. To deliver these services, operators will have an increasing need for physical infrastructure, that is, servers in data centres. Each time we buy cloud services, there is a server behind the cloud application located in a data centre, which performs the necessary calculations and stores our data.
The demand for data centres is set to grow together with the development of the global economy, the scaling of businesses based on new technologies, and the expansion of digital services. And even more so, as consumers have already become used to the advantages and benefits of the digital economy and will not want to dispense with them. It is difficult to imagine any realistic threats to the long-term development of this market.
Which locations are companies interested in such facilities looking at?
At the moment, the development of large-scale data centres is mainly taking place in Warsaw. We are seeing that potential tenants of data centres are generally interested in our city locations, within the city limits, but not in the very centre. The west side of Warsaw is especially interesting to them, due to its excellent infrastructure and the proximity of facilities already operating there.
Cloud data centres could also be established in other cities in the future. In Europe, the public cloud initially only grew around the largest business centres, such as Frankfurt, London, Amsterdam and Paris (known as the ‘FLAP’ cities). Large-scale data centres offering cloud services for end-customers, therefore were mainly being opened in these locations. Until recently, customers from Poland would generally order services from the Frankfurt region. Further increases will mainly depend on the degree of digitisation and our economic growth as well as the further adoption of such services.
Due to the enormous demand for cloud services and the expansion of public cloud providers around the world, the demand for large-scale industrial data centres with a capacity of 20–60 MW continues to grow.