Marketwatch: data centre revival

Many of them promptly cancelled the switch centres and server farms that had been such a splendid source of well paid work for construction firms, many of whom had begun to specialise in the sector. The supply side took a body blow. Consultant WSP wrote off £1.2m last year after one of its technology clients went into administration. "For the past three years, the market's been dead in its tracks," says Damien Kelly, managing director of Mace fit-out arm Como.
After such a fall, the sector has shown little sign of life – until now. Until now, that is, that the stock exchange is starting to rise again, which is stimulating a growth in banking and financial services, which is driving demand for data centres. Recent research from surveyor CB Richard Ellis (see table of clients) shows definite evidence of the green shoots of recovery. It found that by the end of 2003, the west London data centre market had a vacancy rate of 6%. "This is an astonishing change, when you consider that the vacancy rate in the London market at the beginning of 2003 was 48%," says the report.
The CB Richard Ellis report confirms that the corporate sector is the main driver of the resurgence of the market. Roger Francis, director of fit-out contractor Bellwater, which specialises in the technology sector, points to more demand direct from banks themselves, as well as from the government.
He points to the growing use of the internet by government departments and agencies – for example, the Inland Revenue move to online tax returns. "All of that has to be processed and the data stored somewhere."
Another key driver is the perceived threat from global terrorism, which has created demand for disaster recovery centres to supplement the server farms.
CB Richard Ellis' research says that, with no major new stock coming to the market this year, the focus will now switch to London Docklands and the fringes of the City. The market will clearly take interest in one of the biggest players, Global Switch, which has two major data centres in Docklands – one of which is understood to be only one-third full.
Most of the work in the immediate future will be at the smaller end – in construction terms at least. "There are not going to be any megaprojects like, say, £100m – more like £5m fit-out jobs of bits at existing data centres," suggests Como's Kelly. "Larger projects are at least two years away."
And despite the geographical bias of the market being in the South-east/Thames corridor, Bellwater's Francis points to the possibility of them spreading across the UK. "Unless an area is very rural, there are no real connectivity issues," he says – adding, however, that there is no interest in establishing centres in areas such as the Midlands.