Data center development across Europe has long centered around what were first known as the FLAP markets — Frankfurt, London, Amsterdam, and Paris — major global cities, each with deep business and financial sectors. With the onset of hyperscale builds, Dublin became a major destination for data center development, and the acronym became FLAP-D across these major locales. These markets are still critical to the data center ecosystem, with over 500 MW of construction underway among them and each serving as initial entry points to major and minor cloud services embarking on European expansion. New companies and ventures alike are still launched primarily in these markets, as the recent $1 billion initial xScale investment between Equinix and GIC to build hyperscale campuses indicates. Interest in the FLAP-D markets now competes with physical limitations — Amsterdam has announced a temporary development moratorium on new builds and land and power remain scarce across the slate.

Even as these markets continue to thrive, a host of newer locations have joined the data center landscape as operators respond to client demand across the region. Hyperscale cloud spend alone was more than a $10 billion business in 2019 across Europe, with an anticipated rise to an incredible $58 billion by 2024 as both large companies and governments alike continue their IT transformation. The recent pandemic has put a focus on wider accessibility and scalability for the future, as organizations have reconsidered their operations with most personnel working from home for a good portion of the year.

Major cloud services have moved into these markets with aplomb, in methods that might be unusual in more developed areas. In Milan, Google Cloud signed an agreement to partner with Telecom Italia to upgrade both the major telecommunication company’s IT infrastructure and to help its clients do so as well. Microsoft Azure signed a $1.5 billion agreement with Poste Italiane for its IT restructure and to assist with the training of technical staff. At the same time, Microsoft agreed to spend $1 billion on a similar initiative in Warsaw to provide cloud services and training, with both cities gaining new cloud regions.

The data center industry has responded in kind, launching development closer to users and investing large sums of capital in new platforms. Digital Realty closed on its $8.9 billion of Interxion early in 2020, instantly creating a pan-European powerhouse across both primary and secondary markets. Vantage followed with the acquisition of Etix Everywhere and embarked on an aggressive development program across several secondary markets at once. KKR placed $1.1 billion into a new venture known as Global Technical Realty aimed at new development and acquisitions. A wide array of pension funds, sovereign wealth, and private equity firms continue to circle the continent looking for an initial foothold. As ever-larger facilities are required for hyperscale deployments, development will likely be the key to growth and a long-term return on investment rather than attempting to acquire and repurpose existing older assets.

As operators, investors, and major service providers spread their wings across the continent, those who will likely find success will have a distributed portfolio with a variety of accessibility options for mid- and large-size enterprises looking to advance their IT strategies. While growth and modernization are musts, these facets will be achieved via multiple methods as companies seek both scalability and cost control at the same time as they navigate a hybrid IT environment. With all these possibilities in mind, the next several years will create a new subsector of the European data center industry: the true secondary market.