JULY 2 0 2 1

SPAIN
DATA CENTRES
HOW C L OU D INTER ES T IS C R EATING A NEW MAR K ET

EMEA Data Centre Solutions

 WHY INVEST IN DATA CENTRES?
I NDE X Data is often referred to as ‘the new oil’, such is our
growing reliance upon new technologies. This became
evident over the last year as we increased our online
working environments during the covid-19 pandemic.
❑ Why invest in data centres? The development of Industry 4.0 (which relies upon
technologies such as IoT, AI and automatization), cloud
computing, new internet applications and social media,
❑ Concepts and definitions will ensure continued reliance upon exponential
amounts of data and processing power.
❑ The European data centre market This data and processing equipment needs to reside in
a data centre that provides specialist environmental and
❑ Investment drivers security features. As a result, the data centre industry
(offering leased data centre supply) has seen high
❑ The Madrid data centre market supply and demand growth in the last few years.

DATA CENTRE MODELS

❑ The impact of new submarine
cables in Spain HYPERSCALE RETAIL COLOCATION WHOLESALE COLOCATION
DATA CENTRE DATA CENTRE DATA CENTRE
❑ Expert opinion on the Spanish data Hyperscale refers to the largest A model were the operator retains Wholesale colocation providers
cloud computing and internet operational control over a data focus on tenants with larger
centre market service providers in the world that centre and sells connectivity and requirements. In some cases, they
build their own data centres to remote hands services alongside offer a whole building under a
house cloud and other compute server space. End users buy their single-let deal, or they can be
platforms. These data centres tend own servers to place in the site and multi-tenanted, offering varying
to be built large to achieve manage these. Most sites are levels of control (often fewer
economies of scale. multi-tenant. Providers prefer services) over data centre
tenants that take 500KW of less, environments. In many cases
TELECOM though in recent years we have wholesale deals are done at
DATA CENTRE seen larger retail colocation deals. 500KW and can be as high as
Facilities owned and operated by a 50MW.
telecommunications provider.
ENTERPRISE
These data centres are often not
DATA CENTRE
carrier neutral. They usually serve Facilities owned and operated by
customer needs for connectivity MW
the companies they support.
services and cloud and hosted The data centre sector is
Typically, we are seeing many
services. Some of the telecom companies that operate enterprise measured by megawatts
companies offer colocation as an data centres migrate out of these of IT load capacity
addition to other services, but not facilities into retail or wholesale
always the same level of neutrality. colocation so they can gain access
© 2021 CBRE LIMITED to cloud and other services and SPAIN DATA CENTRES | 2021
move CAPEX spending to OPEX.
THE EUROPEAN DATA CENTRE MARKET CHALLENGES AND DRIVERS OF THE
DATA CENTRE MARKET
The four largest data centre markets in Europe are due to on-site construction and supply restrictions resulting
Frankfurt, London, Amsterdam and Paris (collectively from the covid-19 pandemic. Despite this, demand was at
referred to as the FLAP markets). As of Q1, 2021, these an all-time high of 201MW and we expect this will Land and Power Availability
accounted for almost 2,000MW of data centre supply, increase to 370MW this year. We will also see almost
double the amount seen in 2016. Demand from cloud 400MW of new supply come online! Such high demand is
Availability of land and large amounts of high voltage
computing companies (including hyperscale cloud leading to low vacancy rates across the FLAP markets and
power are becoming concerns in all European markets
providers) has accounted for much of this growth. The increasing interest in second-tier and emerging markets
where we are seeing increasing data centre demand.
Spanish market is only now starting to experience similar such as Madrid and Barcelona. Cloud providers are
cloud interest, which is leading to growth across its own increasingly looking to deliver services to local markets
market. Demand in FLAP over recent years highlights the from in-country, as opposed to in-region, and this is Data Protection Regulations
opportunities ahead for Spanish providers. leading to new growth across markets beyond FLAP.
The FLAP markets saw a slight decline in supply growth Learn more about the FLAP markets in CBRE Q1 2021 The implementation of the European Union’s General
last year, with 135MW coming online. This was largely Europe Data Centres report here. European Data Centres Data Protection Regulation (GDPR) has led to an
Q1 2021 | CBRE increase in the construction of data centres in Europe to
Figure 1: FLAP market full-year supply and forecast meet heightened requirements for European and even
in-country data residency. EU companies must store
MW personally identifiable data in an EU-based data centre
3.000 unless certain contractual arrangements are made. This
2.500 has meant many data processing and storage services
previously delivered from outside of the EU now must be
2.000 located in data centres in-region.
1.500
1.000
500 P olitical Stability
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F Businesses thrive in stable, highly functional
Figure 2: FLAP market annual new take-up and forecast environments, and the same is applicable to the data
centre industry. As a result, Europe is often used for
MW delivering services into other global regions, such as
400 Africa, where there is more operational risk.

300

200 Sustainability
100
The leased data centre market has been focused on
0 sustainability for efficiency and now enterprises are
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F realizing benefits that come with using more sustainable
colocation options for their own supply.
Source: CBRE Q1 2021
© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021
INVESTMENT DRIVERS GENERAL OVERVIEW – FLAP VS SPAIN

Figure 3: Spain – ¿ Future market?

The data centre mar ket across Europe Second-tier Market Growth
continues to attr act interest from the
investment community due, in lar ge part, to Europe’s second-tier data centre marke ts
the growing demand from hyperscale include: Stockholm; Dublin, Zurich, Madrid,
cloud operators. The adoption of new Warsaw and Milan. These markets are
technologies and increased requirements establishing themselves as new destinations
from enterprises wanting to outsource their for hyperscale oper ators and investors
technology and data centre environments looking to capture new cloud demand. This
is also leading to gr owth across markets trend is reflecte d in the number of new
beyond FLAP. As a result, smaller second- projects being de ployed in those cities.
tier markets such as Madrid have seen a Madrid, for example, has four new data
high amount of activity in the last 12 to 18 centers projects underway.
months. This is like ly to continue with many
projects now at the stage of site se lection of 4 8
1
The Impact of covid-19
planning application. 2
The data centre sector has shown its 3 7
With so many activities going online, covid- 9
resiliency during the pandemic and is one 19 place d an inve stme nt spotlight on the 6
of the real estate assets that has benefited data centre industry. Since the pandemic,
from the covid-19 pandemic. we have seen the acquisition of US-based
wholesale pr ovider Edge ConneX (which is 5
Institutional and infr astructure funds have
seen the benefit of investing in the growing building in Barcelona) by EQT, and the
data ce nter sector. They are highly active, closing of the acquisition of Interxion by
and are now competing with private equity Digital Realty (Interxion has a data centre
investors for opportunities in the mar ket. presence in Madrid). We are also seeing
Traditional real estate funds are also now increasing interest in inve sting in emer ging
contemplating ways to enter this market. markets with acquisitions in Greece and S I ZE FLAP MARKETS S I ZE TIER II MARKETS
Croatia along other locations. We are also
The first round of investment interest in 1 - LONDON / 711MW 5 - MADRID / 70MW
seeing heightened interest in data centre
data centres focused on the FLAP markets markets such as Barcelona. Over the 2 - FRANKFURT / 432MW 6 – MILÁN / 59MW
but these have become highly competitive. course of the next few years, we expect new 3 - PARIS / 208MW 7 – VIENA / 28MW
Investors are now focusing more on subsea cable developments and increased
second-tier and emer ging marke ts such as adoption of cloud services will drive further 4 - ÁMSTERDAM / 396MW 8 – VARSOVIA / 32MW
Madrid and Barcelona where more interest in investment activity across the 9 – ZÚRICH / 69MW
opportunities for growth exist. Spanish market.

Source: CBRE Research

© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021

 Figure 4: Hosting and Colocation Data Centres
THE SPANISH DATA CENTRE MARKET in Spain

Madrid Market - Demand & Supply

Existing
Spain has a highly mature data centre The colocation data center development Pipeline
market, which is focused around the hub activity in Spain during 2020 already
of Madrid. Madrid is used to serve the reached unprecedented levels with new
data centre requirements of the whole of projects in Madrid and Barcelona promising
Iberia, which most other city locations to add an estimated 70MW of IT capacity
being used to service highly localized over the next 24 months – doubling existing
needs. colocation capacity. The size of projects to
accommodate hyperscale developments has
also grown.
The Iberian peninsula is gaining new
importance as a global data centre Colocation provider Interxion is building a Main data centres in Madrid
desintation with the introduction of new new 32MW data centre and other
subsea cable developments. The Marea international providers are looking to build
& 2Africa (to be completed in 2022) at scale.
submarine cable projects will position
Spain as a key data center destination The development activity still faces some
for delivery of services and transport of challenges where the availability of large
data traffic between Europe and the land plots in Madrid & Barcelona within
Americas. They will also make Spain a proximity to large amounts of high-voltage
natural gateway to Africa. Much of the power and fibre routes is extremely
activity stemming from these cable constrained. These two critical factors, along Main data centres in Barcelona
developments will naturally find its way with planning approval and eliminating
physical risk, are critical to developing these
back to the region’s make data centre
facilities.
market of Madrid, where most services
and connectivity is delivered from today.
The Barcelona market – Spain’s second
largest – is also likely to see some
growth.

Source: CBRE Research

© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021

 REGIONAL SUBMARINE CABLE DEVELOPMENTS WHY INVEST IN DATA CENTRES IN SPAIN

Figure 5: New Submarine Cables Connected to Spain

Unique geographical location in the
centre of American, African and
E uropean continents

Connection with relevant new

submarine cables, which link to the
Americas and Africa

Strong internet growth, accelerated by

cov id-19

E xpansion of data centre markets

outside of FLAP as end users seek
proximity to local markets, strategic
connectivity hubs and in-country
presence

Stable and high investment yields

Source: CBRE Research

How submarine cables will open up new opportunities

Limited number of operators
Madrid is the lar gest data centre market in Spain but CBRE does expect to see some growth in smaller
locations such as Barcelona or Bilbao as a result of major submarine cable developments.
The 2Africa submarine cable will connect from Barcelona to 23 countries circumnavigating the African
contine nt. It is backed by a consortium of companies that includes Face book. The Grace Hopper cable that P otential for lower cost of energy based
will come online in 2022 will connect Bilbao to the UK and US offering an alternative to traditional subsea on local renewable sources
cable routes between Europe and the US.
© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021
EXPERT OPINION This will undoubtedly expand the number of players in the market. In fact, from the city of Madrid alone, the entire peninsula can be
served very easily thanks to large fibre optic and FTTH networks,
Spain's geographical location has helped to promote the something that few countries can boast. If we compare the installed
international visibility of our country for the termination of rate of data centre capacity measured in MW IT with the GDP per
submarine cables, an essential component of the backbone digital metropolitan area, for Madrid to reach the level of London or
infrastructure, together with the data centres for interconnecting Amsterdam, the current capacity would have to be multiplied by 7
them. Likewise, these data centres in the centre of the peninsula and 14 respectively. This highlights the huge potential for growth.
have become a magnet for attracting the physical infrastructure In fact, in two years' time, we estimate that the capacity of the
(servers, routers, switches, etc.) of companies that provide digital market will double just with the expansion plans we have in place,
services and facilitate the distribution of content to users. Our both from Interxion and other suppliers.
sector, also known as "MTDC" (Multi-Tenant Data Centers), is in
locations with a high concentration of population and GDP and In terms of the investment market, capital comes mainly from large
therefore where the demand for digital services is greater, as is the data centre operators, listed companies, although an increasing
The pandemic has accelerated case of Madrid, which has a strategic position in the centre of the number of independent funds with new brands are also investing in
interest in the data centre segment in peninsula for both distributing and receiving content. Barcelona is this sector. The key factors for our sector are the concentration of
Spain. Despite not being a star the second location with very interesting prospects for development networks, the interconnection of companies within our data centres
country in the sector, large and diversification, so much so that it could be an and the availability of large electrical power capacities.
customers have shown their interest alternative/complementary destination to other more consolidated
in the peninsula. From our markets such as Marseille (France), where there is a large As major challenges, we would highlight being an active part of the
experience of more than 20 years in concentration of cables interconnecting Asia Pacific, the Middle electricity planning in the area where we are located, greater
the market, we have gone from East and East Africa. certainty in the processes for obtaining licences/permits and less
being just three companies in 2020 bureaucracy within the Public Administrations. Another challenge,
to seeing a huge explosion with the With an average annual growth of around 15%, mainly in large or rather desire, is for the Public Administration to recognise us as
arrival of large public cloud markets, there is a trend towards a concentration of larger centres. a key productive sector due to our high contribution to GDP, so
providers, B2C platforms (e.g. Corporate data centres are increasingly being outsourced for that the Public Administrations disseminate the sector's strategic
Facebook, TikTok, Netfllix, Disney) advantages such as better security, lower costs and higher quality value with greater communication outside Spain. According to a
and the needs of non-technological of service. This is leading to the closure of smaller corporate data study carried out by independent consultants for Interxion, we
companies to host their applications centres and those that remain due to their large critical mass are concluded that for every euro invested in large data centres
close to network and cloud access much more energy efficient according to data from the (MTDC), between €9 and €12 is generated, depending on the
points. Consequently, this has led to International Energy Agency (IEA) which monitors the energy policies applied to promote and strengthen the sector. There is
the entry of new players in Spain efficiency targets of multiple business sectors. In the last ten years, confirmed private sector investment of €680 million in Madrid
such as Data4 or NTT among internet traffic worldwide has increased 12-fold, IT load in data between 2020-2025, which is estimated to generate a GDP wealth
others. centres by 7.5 times, while electricity consumption has remained effect of more than €8 billion and around 2,500 jobs (direct,
the same. indirect and induced).
The top three public cloud providers
(AWS, Microsoft and Google) have Public Cloud Computing technology is mostly American, initially Finally, this sector could be one of the great levers for the
announced plans to deploy their driven by the first Obama administration, which promoted the development of the renewable energy sector, as the electricity
physical infrastructure in Spain. Cloud-First policy for public administration, saving, according to demand of companies such as Interxion is 100% renewable
While AWS will do so autonomously official figures, around 6 billion dollars by closing obsolete data energy.
with its own data centres, both centres, contracting Cloud services and concentrating their servers All in all, there are many arguments that augur a more than
Microsoft and Google will do so by in an external provider. promising future for the data centre sector in Spain.
deploying their infrastructure in
hyper-connected third-party data It is difficult to estimate whether Spain will reach the levels of the
centres. so-called FLAP markets, but what is certain is that we are on the Robe rt Assink
way to closing the gap thanks to the large capillary G e neral Manager Interxion
telecommunications network that our country possesses.
SPAIN DATA CENTRES | 2021
C ONTA C TS

ANTHONY LABADIE LOLA MARTINEZ PENNY MADSEN-JONES

Director Director Director EMEA Data Centre

Data Centers Solutions Research Research
CBRE Iberia M +34 915143941 Data Centre Solutions
T +34 915 981 900 [email protected] M +44 7748 769 593
[email protected] [email protected]

MIRIAM GOICOECHEA CONCEPCIÓN MINGUEZ

CBRE can offer more detailed
Associate Director Senior Research Consultant insight into the spanish market
Research Research including country-level consulting
M +34 607 098 266 M +34 991 514 3855 reports. Please contact
[email protected] [email protected] [email protected]
for further information.

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© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021