ViewPoint European Data Centres

Q1 2011

CB RICHARD ELLIS

IN THIS ISSUE
Executive Overview Supply Availability Take-up and Demand Forecast Data Centre Topics Market Focus London Market Focus Paris Market F M k Focus F kf Frankfurt Market Focus Amsterdam Market Focus Madrid Definitions Data Source

EXECUTIVE OVERVIEW
As of this quarter we have rebased our data centre q statistics to show floor area on a net equivalent basis i.e. shell space will now be shown in respect of the net technical (fully-fitted) space that would be created following buildout. This has also enabled us to apply power densities against key statistics in order to provide greater market clarity. From next quarter our statistics will show both space and power indicators in the reported markets. The first quarter of 2011 has shown that whilst market sentiment has seen some improvement, demand remains tentative, and as such this year is likely to follow a similar path to last year. 2010 represented a relatively subdued year for both take up and supply in the take-up European Tier 1 markets, with a wait and see approach adopted by both occupiers and operators alike. For the most part, 2011 has begun in the same way, perhaps a further indication that whilst there is some renewed optimism, a level of caution still remains, with the changing outlook for the European economy of particular concern. A key feature of last year was the fundraising initiatives of several of the main data centre operators in order to facilitate portfolio expansion and strengthen balance sheets. Despite the uncertain economic backdrop, 2011 has already seen examples h t D it th t i i b kd h l d l of how and where some of this newly gained funding is likely to be utilised. A number of significant announcements regarding new schemes have been made since the turn of the year with further plans likely to emerge as the year unfolds. Activity in the European Tier 2 markets has been of particular note with several strategic expansion plans announced and new facilities unveiled in Quarter 1. The European Tier 1 markets have also seen expansion plans progressed providing further evidence of a more positive outlook by operators. Going forward these will provide a much needed boost to depleted levels of available space across the European Tier 1 markets which now record a fully-fitted vacancy rate of 7.4%, an alltime low. The major players are taking steps to position their operations in order to take advantage of untapped and longer term future demand. At present, demand has been largely similar to that seen at Quarter 1 in previous years, although still at a g y p y , g pace at which available supply levels are being eroded. A significant source of future demand is likely to come from the corporate sector as occupiers emerge from the austerity measures which have restricted IT spend since Quarter 3 2008. The London market has already seen signs of this happening with a shift in the scale of corporate requirements indicating a move toward longer term strategic views being taken. As such London appears to be ahead of the other Tier 1 markets in terms of recovery, with all of the Tier 1 cities expected to show varying degrees of improvement as the year progresses. As a consequence total market takeup for the year is likely to show marginal improvement from 2010, reflective of the improving market conditions. CBRE Data Centre Finder: www.cbredatacenterfinder.co.uk

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SUPPLY
CARRIER NEUTRAL HOTEL (CNH) SUPPLY Overall stock levels in the European Tier 1 markets have remained unchanged from 2010 with no new supply coming to market in the first quarter. However, several announcements of new schemes have been made in Quarter 1 providing indication of operators beginning to pick up the pace. Last L t year, the l th legacy of th C dit Crunch continued f the Credit C h ti d to subdue market demand which in turn provided operators with little incentive to pursue new expansion projects. Subsequently supply levels during 2010 increased by 5%, the lowest rate since 2006. The first quarter of this year however, has seen operator sentiment become more positive, with a number of expansion announcements already made following the turn of the year. Both Tier 1 and Tier 2 locations have been targeted for key projects, with expansion of existing facilities and a number of new builds on the horizon. Several of these projects will provide much needed new supply going forward, particularly in the Tier 1 locations where vacancy levels have fallen y consistently over recent months. However, given the lead times associated with new build projects, the benefit of any significant new supply is not likely to be seen until the back end of this year at the earliest, with the majority arriving in 2012/13. As such, 2011 will see overall vacant supply levels decline further in response to the expected rise in demand. SUPPLY & AVAILABILITY
700 600

AVAILABILITY
CNH AVAILABILITY The European Tier 1 market has seen levels of available space decline further in the first quarter as current market demand continues to outpace the introduction of new supply. Demand levels in recent quarters have not been exceptional and operators have been reluctant to commit resources without a clear i di ti of rising it ith t l indication f i i demand to support new schemes. As such, the level of vacant space across the European Tier 1 market has consistently fallen, now reaching a new low at the end of Quarter 1. The total market vacancy rate has now decreased to just over 18%, having fallen from close to 22% in the past 12 months. Of particular note has been the decrease in the level of fully-fitted space which is now at 7.4%, the lowest level seen in our records. London and Madrid in particular have seen levels of vacant fully-fitted space eroded with both markets now under 5%. It is clear that the European Tier 1 market has p reached a point at which new supply will be needed in order to maintain market balance and meet the expected rise in demand. We have seen a number of projects already unveiled and further plans have been announced. In the short term, a further tightening of vacant supply is likely before the arrival of new stock toward the end of the year. AVAILABILITY SPLIT
160 140 120 100
m (thousands) (

500 400 300 200 100 0 2006 2007 2008 2009 2010 2011 Q1 Supply Availability

m (thousands) (

80 60 40 20 0 2006 2007 2008 2009 2010 2011 Q1 Fitted Shell

Source: CB Richard Ellis Research

Q1 2011

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MARKET NEWS Despite concerns regarding uncertainty in the wider economy and any potentially limiting impact on demand, participants in the data centre market across Europe have seen a number of notable additions to data centre space during the first quarter of 2011. Retail l R t il colocation providers h ti id have h d another b had th busy quarter; Interxion completed the 640 m second phase of its data centre in Zurich-Glattbrugg, and EvoSwitch announced a 5,000 m expansion of technical space in its Amsterdam facility. In Nuremberg, Germany, web hosting provider Hetzner Online reported plans for new 39,950 m data centre park with the first two units of the facility housing up to 30,000 servers, and in Paris Equinix reported it had started construction on its fourth Paris data centre, scheduled to open in the third quarter of 2012. In Istanbul, Turkey, Telehouse has announced the opening of its new data centre in partnership with local telco company Teknotel Telekomnikasyon to provide space for around 2,000 servers. In the UK, UKGrid announced that it had begun to expand its Synergy House, Manchester, data centre to provide a further 595 m; iomart Group completed the 650 m second phase of an expansion programme at its Spectrum House, Maidenhead facility and Sentry42 announced the launch of their 5,575 m newly refurbished m Gatehouse Data Centre close to Norwich. From a development perspective, in the UK actual build activity has been limited. However, the quarters highlights have included reports that Highbridge have secured planning consent for the second phase of their Cobalt Business Park scheme, allowing them to deliver a further 3,360 m of technical accommodation, whilst a new 250 million fund k f d known as M tt h Matterhorn C it l D t Centres h Capital Data C t has been launched, following their acquisition in late 2010 of sites in Chesham and Bury Green with planning approval for two 4,180 m facilities and two 3,970 m respectively. Also in the UK, an international bank gained planning approval for a potential data centre at Whessoe Grange Farm near Darlington, although it is reported that they are also looking at a number of possible sites across the country for their new facility. As has been the case over recent years, the IT integrator and telecom sector continues to play an active role in the European data centre market. One of the most significant announcements has seen Portugal Telecom report that it is to build a 45,000 g p m facility in Covilha, Portugal. Projected to be the largest data centre in Portugal when it is opened in the second half of 2012, it will, in part, be powered by an adjacent wind farm and offer capacity for around 50,000 servers. In addition, BT announced plans for new centres in Amsterdam and Frankfurt, whilst in the UK data management specialist Onyx announced it had bought a data centre on Teesside, to give it extra capacity for its data hosting facilities.
Source: iXConsulting

FULLY-FITTED CNH AVAILABLE STOCK PER TIER 1 MARKET

35 30
Cit Lines (thousand m) ty

100 90 80 70 60 50
To Bar (thousand m) otal

25 20 15 10 5 0 2003 2004 Total (RHS) 2005 2006 2007 Frankfurt 2008 London 2009 Madrid 2010 Paris 2011 Amsterdam

40 30 20 10 0

Q1 2011

Source: CB Richard Ellis Research

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TAKE-UP AND DEMAND

2011 has begun with further improvement in the level of market demand, carrying on the upward demand trend from recent quarters. However, a comparison a little further back provides a clearer picture of the current market position. When compared to the same period in previous years, total market take-up remains very much close to the long term average. As such, whilst we feel sentiment in the market has shown i ti t i th k th h improvement t from last year, a degree of caution still remains, particularly surrounding the fragility of growth prospects for the respective European economies. A notable dynamic from last year was the prominence of demand for Retail colocation product, which underpinned take-up in the European CNH market. This was very much representative of k h h f market conditions in 2010 which saw Retail colocation providers favoured as they were able to offer shorter more flexible terms. Early 2011 has seen this trend alter slightly with the take-up in the Wholesale and Retail colocation sectors showing an even split during the first quarter. Indeed the re-emergence of the Wholesale colocation sector has been a particularly encouraging development of the first quarter. The Wholesale colocation market was largely subdued last year, with only London seeing any activity of note. 2011 however, has already seen 4 major Wholesale colocation deals completed, accounting for 40% of total take-up in the quarter. This is representative of a shift in the scale of space being demanded and perhaps provides indication that corporate occupiers in particular are now willing and able to deploy longer term IT strategies. Demand for Retail colocation space has also continued into the new year however, although in comparison to Q1 2010, the total space transacted has been slightly lower. Our discussions with operators have shown that much interest is being expressed in the market although transactions are taking longer to complete. As such, we expect to see an increase in take-up of Retail colocation space in subsequent quarters as this interest turns to b t t thi i t tt t transacted space. Looking forward, total market demand levels are expected to increase as corporate spending on expansion and improvements to IT Infrastructure picks up pace. Furthermore, the pursuit of new technologies will provide additional demand for data centre provision, with third party providers well placed to support this.

TOTAL MARKET TAKE-UP BY MARKET SECTOR

120 100 80
m (thousan nds)

60 40 20 0 2006 retail colo 2007 2008 2009 2010 2011 Q1

wholesale colo

self build

threat stock

TOTAL MARKET TAKE-UP Paris Madrid M d id 8% 1%

London 25%

Amsterdam 43%

Frankfurt 23%

TAKE-UP European Tier 1 Cities 2007 2008 2009 2010 2011 Q1 Total CNH Take-up (m) 70,350 72,030 48,110 41,610 12,950 12 950 Total Market Take-up (m) 114,095 96,730 48,575 45,770 12,950 12 950

Q1 2011

Source: CB Richard Ellis Research

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The first quarter of 2011 saw both expansion and consolidation announcements of notable size. These size two distinct characteristics of data centre activity may well provide encouragement that we have moved into a more positive stage of the European data centre cycle, as companies start to execute IT strategies and technology refreshes that had remained dormant due to constrained IT budgets. Changes i IT b i Ch in business, particularly associated with ti l l i t d ith the growing acceptance of strategies such as Cloud Computing, will mean that implementation moving forward will involve both expansion and consolidation of data centre estates. An increase in general activity, therefore, gives us the strongest indication that tight constraints on finance may well be loosening, which can only be seen as encouraging f the European d for h data centre market. k Amongst those consolidating their data centre portfolios, international law firm, Clifford Chance reported that it is to close its Paris and Amsterdam data centres, reducing the number of data storage sites from four to two in Europe. Management consultancy, KPMG announced plans to move its y p systems to a private cloud, consolidating 30 of its European data centres into one located in Frankfurt. In the UK, utility company, Severn Trent Water, reported its intentions to cut its four data centres to two, and the Dutch government announced plans which will see it reduce its data centre stock from sixty four to five. TOTAL MARKET TAKE-UP BY SECTOR IN QUARTER 1
Corporate 9%

In terms of announced expansion, some of the most significant deals included Sentrums lease of 930 m Sentrum s m of space in Woking, UK, to US data centre colocation provider, Cyrus One, including an option agreement on an additional 930 m, whilst in Ireland, Amazon reported the purchase of the 22,539 m Tesco storage facility at Greenhills Industrial Estate in Dublin which it intends to use in conjunction with its two other Dublin northside buildings t build out its data centre estate. In b ildi to b ild t it d t t t t I addition, an unknown retail bank took 3,500 m of space at Infinitys data centre in London, along with a further 1,000 m at Colts facility in Welwyn, north of London, where IT services company Phoneix IT also agreed to take space. IT outsourcing continues to play an important role in data centre take-up over the f d k h first quarter of the year, f h although remains difficult to quantify in terms of floorspace for the purpose of our report. Centrica reported that it had signed an outsourcing agreement with HP Enterprise Services, enabling the company to move to a utility-based private cloud computing environment, supported by HP from two of its data centres in the UK, including one in g Wynyard. In addition, Atos Origin announced significant deals with customers such as D+S, neckermann.de, the Dutch Office of Public Prosecution and Rexel.
Source: iXConsulting

TOTAL MARKET TAKE-UP BY SECTOR 5-YEAR TREND

Technology 31% Technology 40%

Corporate 36%

Retail 44% Systems Integrator 10%

Systems Integrator 7%

Retail 23%

Q1 2011

Source: CB Richard Ellis Research

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FORECAST
2011 has begun with a greater level of optimism despite uncertainty still surrounding the outlook for the European economy. Ultimately it is developments in the wider economy that will define the level and nature of market demand going forward. It is clear from our discussions, that the consensus view is that the bottom of the current market cycle has been reached. London in particular has seen market conditions improve i recent quarters and as k t diti i in t t d such we believe London is ahead of the other Tier 1 markets in terms of market recovery. Consequently 2011 is expected to see demand growth in all of the European Tier 1 data centre markets, albeit at a differing pace. Operator activity in the first quarter goes some way to support this opinion with a number of projects h h b f already announced in anticipation of an uplift in demand. Further expansion announcements are likely to follow as the year progresses, with the main players positioning their operations in order to meet emerging requirements. Increases in market activity for the first quarter have y q not translated into higher levels of completed transactions however. Total take-up in Quarter 1 has largely been similar to that in 2010, although we expect to see some of this early interest converted in to transactions during the course of this year. Furthermore, noteworthy from the quarter has been the increase in demand for Wholesale colocation space. 2010 was characterised by the greater number of short term requirements in the market as occupiers placed longer term strategies on hold and advanced only critical IT spending. This subsequently benefitted the Retail colocation providers, who are able to offer more flexible terms. Early E l 2011 has seen a number of Wholesale h b f Wh l l transactions completed, perhaps providing an indication of a return to more comprehensive IT planning being implemented. Further evidence of a shift in market sentiment will emerge as the extent of the relaxation of IT budgetary restraints becomes clear. Additional demand is likely to be driven by the everdd ld d lk l b d b h increasing reliance on IT infrastructure to support wider business objectives. The pursuit of greater efficiency through new technology will be a big part of this. As a consequence, 2011 is likely to see greater interest in data centre provision requiring the support from third party providers. Furthermore as budgetary considerations are loosened, further g y interest in self build opportunities is likely to gain momentum.

EUROPEAN TIER 1 MARKET HISTORY AND FUTURE PROJECTION

250
PROJECTION

200

150

m (thousands)

100

50

0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 P 2012 P

CNH availability

CNH take-up
Source: CB Richard Ellis Research

Q1 2011

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DATA CENTRE TOPICS

TECHNOLOGY - The Cloud and outsourcing options remain key Evidence from a number of published reports continues to underpin support for the growth in Cloud Computing as an IT strategy. A recent Unisys poll shows that Cloud is the main investment priority amongst 44% of IT managers for the year ahead, whilst EMC reported in their survey that around 2.4 million jobs could be created across Europe, Middle East and Africa by 2015 due to the technology. Furthermore, their forecast for the financial impact of Clouds adoption is estimated to be around 640 billion when cost savings and business growth are evaluated. Further evidence of the positive impact of Cloud computing on the data centre market has been noted this quarter. Salesforce.coms reported plans to add 9,390 m of colocation space to its current seven data centres in the US and Asia, will include a new facility in Europe to be opened next year in order to support Cloud computing. Meanwhile, IBM announced that it expects to generate revenue of US$7 billi globally f billion l b ll from it Cl d services b its Cloud i by 2015; services that will have to be supported by a robust data centre estate. FINANCE - Fundraising over the last year Since the start of the year, there have been some significant company acquisitions reported amongst global IT services providers that will involve the l b l i id th t ill i l th transfer of European data centre assets. Whilst this will not directly affect the supply and demand balance, they are important as an illustration of activity amongst companies who are key investors in data centre stock. These have included CenturyLinks agreement to acquire Savvis for US$2.5 billion, whilst Verizon has agreed to buy Terremark for US$1.4 billion. Additionally, in the UK Lumison, the Edinburgh-based internet services firm acquired Blue Square, the builder and operator of data centres in Maidenhead, Berkshire, and Milton Keynes, Buckinghamshire, for 22 million. In addition to an active company investment market, it should also be noted that there have been a number of announcements of European wholesale and retail data centre players engaging in finance raising to strengthen balance sheets and fill up warchests. Most recently, wholesale carrier neutral data centre owner and operator, Global Switch, launched a bond issue for 600 million to pay off existing inter-group indebtedness, whilst TelecityGroup raised a further 100 million of debt and i/o Datacenters raised around $100 million to fund their global expansion including planned schemes in Europe. Date Jun 2010 Company Iomart Type of Deal Secured a 10 million credit facility from Lloyds Banking Group Raised $150m in financing for the construction of new data centres in from the Overseas Private Investment Corporation. Successful IPO in January 2011 generating 138.6 million net proceeds to the company Received a US$105 million investment to fund global expansion including Looking t L ki to raise 500 i million via bond issue Raised additional 100 million of debt financing 5 million funding from Lombard and Finance Wales
Source: iXConsulting l

There are on-going concerns with regard to the adoption of Cloud technology which may slow its proliferation. According to the 'Cloud and the Future of Business report from Accenture and the London School of Economics and Political Science, IT departments remain concerned about issues such as security and privacy as a barrier to Cloud adoption. In addition, a recent Vanson Bourne survey of 200 IT directors found that 71% of IT directors are worried about the potential management headaches of Cloud. Prospects for third party providers of data centre services appear healthy according to research house Infiniti Research. Their "Global Data Center Outsourcing Market 2010-2014" report forecasts that the global data centre outsourcing market will reach US$163 billion by 2014, again bolstered by changing IT strategies and Cloud adoption. However the story of Cloud or similar technologies plays out over the next few years, it is highly likely that its rate of i l f implementation will h t ti ill have a significant i i ifi t impact on t activity in the global data centre market moving forward.

Dec 2010

DataSpace Partners

Jan 2011

Interxion

Apr 2011

i/o Data Centers

Global Gl b l Switch May 2011 Telecity Group May 2011 Next Generation Data

Apr A 2011

Q1 2011

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MARKET FOCUS LONDON

London has started 2011 positively with consistent levels of demand carrying through from last year year. Of particular note in the first quarter has been a continuation of transactional activity in Londons Wholesale colocation sector. Three noteworthy Wholesale colocation deals have been completed in London representing around 40% of the European total. The significant contribution to total take-up from the Wholesale colocation sector last year was reflective of the changing scale of occupational requirements present in the London market. This was very much in contrast to the other European Tier 1 cities, and further evidenced Londons emergence from the bottom of the current market cycle. Demand in the Retail colocation sector was also particularly prominent last year and so far this has continued into 2011. Total take-up for the first quarter has been less than seen at this stage in previous years however. Despite this, the outlook remains positive with an increasing amount of market interest likely to conclude later this year. y y The level of available supply in London remains particularly low with total vacancy at 17%. The availability of fully-fitted space has now become particularly tight dipping to under 5% at quarter end. A number of new schemes are expected going forward although the majority of these will arrive in 2012. KEY MARKET HIGHLIGHTS Cyrus One takes 930 m at Sentrums Woking facility, with an option agreement on an additional 930 m A Fortune 500 insurance provider has signed a turn key data centre lease at a Digital Realty Trust facility Source: Jonathan Heap, iXConsulting. MARKET COMMENT 75% of large UK organisations outsource at least some of their data centre requirements and 47% remained resolute that they would only use best of breed technologies. Whilst cost is one element of the business decision its no longer the deciding factor. Companies today need to ensure that they are working with a business partner focused on quality that will also offer expertise and experience in order to help them remain effective in the long term.
m (thousands)

CNH MARKET KEY INDICATORS Stock 253,350m Availability Vacancy Rate 42,700m 16.85% Take-up 3,305m

5-YEAR CNH SUPPLY

300 250 200

m m (thousands)

150 100 50 0 2006 2007 2008 2009 2010 2011 Q1 Stock Availability

5-YEAR CNH TAKE-UP

35 30 25 20 15 10 5 0 2006 2007 2008 2009 2010 2011 Q1 Take-up 5-year average
Source: CB Richard Ellis Research

Q1 2011

Franek Sodzawiczny Co-Founder Sentrum

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MARKET FOCUS PARIS

2011 promises to provide some improvement in market sentiment although this may not translate sentiment, into an increase in transactions until the latter part of the year. 2010 produced a year of weaker than expected demand despite a promising start. As the year progressed, demand levels did see some improvement although not reaching the heights recorded previously. d d i l However, 2011 has been met with renewed optimism by operators with the expectation that the current market cycle is bottoming out and as the year progresses improvements will be forthcoming. As such demand is forecast to show an increase during 2011, although much of the new interest seen now may not convert to transactions until the end of the year. For Quarter 1 total take-up has largely been in line with that seen at the end of last year. The Retail colocation sector continues to see the majority of activity, although as demand increases we would expect to see the types of transactions completed p yp p diversify. Supply levels have in Paris have remained largely unchanged during the quarter. Total take-up still outpaces new supply and as such the level of vacant space has fallen to around 16.5%. Increases to supply in Paris are expected this year with Quarter 4 likely to see the first arrive following the opening of the new Global Switch facility. Further increases are scheduled for 2012 and will be necessary in order to support the expected rise in demand. KEY MARKET HIGHLIGHTS Clifford Chance is to close Paris data centres Dell announce new Global Solution Centres will open in Paris Equinix announced the start of construction on its fourth Paris facility Source: Jonathan Heap, iXConsulting. MARKET COMMENT The data centre market in Paris retains European and Global importance and will continue to be a location of choice for leading market providers. Adam Levine VP Sales Digital Realty Trust
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CNH MARKET KEY INDICATORS Stock 95,460m Availability Vacancy Rate 15,720m 16.47% Take-up 1,065m

5-YEAR CNH SUPPLY

120 100 80

m m (thousands)

60 40 20 0 2006 2007 2008 2009 2010 2011 Q1 Stock Availability

5-YEAR CNH TAKE-UP

20 18 16 14 12

m (thousands)

10 8 6 4 2 0 2006 2007 2008 2009 2010 2011 Q1 Take-up 5-year average

Source: CB Richard Ellis Research

Q1 2011

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MARKET FOCUS FRANKFURT

Following a relatively weak 2010 which was characterised by limited new supply and subdued market demand, 2011 has begun the year with much promise. Quarter 1 has seen good levels of market activity which in turn has transposed into completed transactions. The main area of interest has again been in the Retail colocation sector which has accounted for all of the take-up recorded for the t df ll f th t k d d f th quarter. This continues to reflect the dynamics of the Frankfurt market in which there are a limited number of Wholesale operators present in Frankfurt currently. The positive levels of demand this quarter have also ensured that vacant supply in Frankfurt remains particularly low. At quarter end the overall vacancy rate in Frankfurt fell to 19.5%, under the point at which we would feel new supply would be necessary to maintain market balance. 2011 has already seen several announcements made regarding potential areas of new supply and further announcements are expected going forward. Much of this new supply is still at an early stage in planning or construction. As such, we would expect to see the level of vacancy continue to fall this year before new space begins to arrive in 2012. KEY MARKET HIGHLIGHTS British Telecom announced plans f a new d B ii hT l d l for data centre KPMG announce planned consolidation of 30 European data centres into one Frankfurt facility EvoSwitch and Polar Wireless announced plans for a new data centres in Frankfurt. X OpenDNS opens new data centre
m (thousands) m m (thousands)

CNH MARKET KEY INDICATORS Stock 146,220m Availability Vacancy Rate 28,510m 19.50% Take-up 2,965m

5-YEAR CNH SUPPLY

160 140 120 100 80 60 40 20 0 2006 2007 2008 2009 2010 2011 Q1 Stock Availability

5-YEAR CNH TAKE-UP

30 25 20 15 10 5 0 2006 2007 2008 2009 2010 2011 Q1 Take-up 5-year average
Source: CB Richard Ellis Research

Source: Jonathan Heap, iXConsulting. MARKET COMMENT Frankfurt's pos o as the most important da a ce e a u s position e os po a data centre market for both wholesale and colocation in Germany has been validated by the demand over the last 12 months. We notice an increasing demand in the high density colocation market, especially from medium-sized companies. Rupprecht Rittweger Managing Director e-shelter

Q1 2011

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MARKET FOCUS AMSTERDAM

The strong market demand seen in 2010 has continued through into the early part of 2011 with Amsterdam enjoying higher than expected levels of market activity in the first quarter. In terms of market size, Amsterdam remains the second smallest of the European Tier 1 markets. 2010 however, saw Amsterdam receive exceptionally high levels of demand for a market of its size and finished the fi i h d th year with t t l t k ith total take-up second only to d l t the much larger market of London. 2011 has begun the year in a similar vein, seeing Amsterdam record the highest level of take-up across all of the European Tier 1 markets in the first quarter. Particularly noteworthy has been a large Wholesale colocation deal that has been completed, which in turn has boosted the overall take-up total in Quarter 1.
m m (thousands)

CNH MARKET KEY INDICATORS Stock 76,670m Availability Vacancy Rate 14,700m 19.17% Take-up 5,545m

5-YEAR CNH SUPPLY

90 80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 Q1 Stock Availability

Demand for Retail colocation space, which was a mainstay in the Amsterdam market last year, has also remained high. For Quarter 1, Amsterdam has seen 2,500 m of retail colocation space transacted, very much above with the 5-year average. y y g As a consequence of the strong demand of 2010, vacancy levels fell sharply in Amsterdam with little new supply replenishing stock during the year. The beginning of 2011 has seen the new EvoSwitch expansion unveiled, which has provided a necessary boost to the level of vacant fully-fitted supply in the market. As the year progresses, market demand is forecast to remain relatively consistent. Consequently, further additions to supply will be required to maintain a healthy market balance. KEY MARKET HIGHLIGHTS FusionStorm opens its second European data centre in Amsterdam.

5-YEAR CNH TAKE-UP

9 8 7 6

m (thousands)

British Telecom is planning to increase data centre through construction of a new facility in Amsterdam. EvoSwitch opens 5,000 m expansion voSw c ope s e pa s o Source: Jonathan Heap, iXConsulting. MARKET COMMENT The Amsterdam data centre market is extremely competitive and remains a key destination for clients requiring a superior data infrastructure environment. environment

5 4 3 2 1 0 2006 2007 2008 2009 2010 2011 Q1 Take-up 5-year average

Source: CB Richard Ellis Research

Q1 2011

Eric Boonstra Managing Director EvoSwitch

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MARKET FOCUS MADRID

Subdued activity continues to characterise the CNH market in Madrid although Madrid may well see the Madrid, landscape change in the near future. Madrid represents a market that has not progressed at the same pace as the other Tier 1 cities. To date, Madrid remains the smallest of the European Tier 1 markets positioned well behind the other established markets in terms of stock offering and market activity. However, recent quarters have suggested the markets dynamics in Madrid are changing. Corporate interest in third party data centre provision is increasing, although requirements have remained small, largely satisfied by systems integrators who in turn have taken space at colocation facilities. Pan European operator representation remains low in 2011, with Global Switch continuing to hold the largest portfolio. Recent news releases however, have suggested interest from other major players such as Equinix may alter the current operator landscape. Although, to date, firm commitments have yet to be established. y For Quarter 1, the market in Madrid has seen limited activity. Total take-up for the quarter was low, seeing a number of smaller transactions complete. Vacancy levels continue to be around 23% although much of this is shell space. Vacancy of fully-fitted space is now particularly tight, perhaps more reflective of the reluctance to fit out large amounts of space without an indication of sustainable demand. KEY MARKET HIGHLIGHTS Equinix announced that it is considering expanding into new markets including Madrid. Source: Jonathan Heap, iXConsulting. CNH MARKET KEY INDICATORS Stock 34,620m Availability Vacancy Rate 7,820m 22.59% Take-up 70m

5-YEAR CNH SUPPLY

40 35 30 25

m m (thousands)

20 15 10 5 0 2006 2007 2008 2009 2010 2011 Q1 Stock Availability

5-YEAR CNH TAKE-UP

2.5

2.0

1.5

m (thousands)

1.0

0.5

0 2006 2007 2008 2009 2010 2011 Q1 Take-up 5-year average

Source: CB Richard Ellis Research

Q1 2011

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DEFINITIONS
STOCK TYPE 1. Colocation stock: Carrier neutral (CNH) data centres where the operator allows any carrier to connect into the facility and to connect to third parties within the facility, not discriminating between different carriers and charging only nominal fees for interconnection. This is split into two distinct offerings: Retail: targets smaller requirements in terms of floor space/IT power and offering an element of colocation/managed services. Wholesale: targets larger requirements in terms of floor space/IT power and offering real estate FM services only. y 2. Self-build: typically land for development or modern empty warehouse which is acquired for conversion to a data centre for use by an end-user who will use the space for their own purposes, i.e. a corporate. 3. Threat stock: Surplus carrier/webhosting space offered to the market as competing stock on a carrier neutral basis SPACE TYPE Shell : Shell & core space is the base real estate of a data centre, a wind and watertight structure with exposed centre floor and ceiling slabs and exposed finishes to the walls. The landlord would obtain permissions for data-centre use and make provisions for tenants to install their own chillers and back-up power generating equipment. In addition, an incoming diverse raw HV (high voltage) power supply would usually be provided. Fully-fitted: Fully-fitted space is ready for tenant IT equipment to be installed almost immediately or subject only to minor works being carried out to account for bespoke equipment and layouts. TRANSACTION TYPE Retail Transaction: individual letting smaller than 185 m (2,000 ft). Wholesale Transaction: individual letting greater than 185 m (2,000 ft). We do not break down Retail transactions across sector type but we analyse wholesale transactions as follows: Corporate Systems Integrators Technology TIER 1 MARKETS Amsterdam, Frankfurt, London, Madrid, Paris These markets were chosen as they had the highest CNH stock size in 1999 when we started our data set. We acknowledge that Madrid is no longer a true Tier 1 market. TOTAL MARKET TAKE-UP This comprises CNH, Self-build and threat stock (either surplus carrier or corporate facilities).

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DATA SOURCE
CB Richard Ellis in association with Jonathan Heap, Director, iXNewsSearch iXNewsSearch is the leading daily news research service developed for organisations with a strategic interest in the data centre and mission critical facility industries. Groundbreaking at its inception in 2001, the interactive e-mailed document is packed with global news providing invaluable and timely insights into the business of data centres. CBRE Technology Practice Group CB Richard Ellis formed a Technology Practice Group (TPG) in 1994 to address the specialised technical real estate needs of high-tech firms such as telecommunications companies, data centre operators and corporates. Core technical real estate services provided by the TPG include: Investment Disposal one-off assignments, multi-site marketing campaigns Acquisition one-off assignments, worldwide network rollouts Consultancy consolidation strategies, Mergers & Acquisitions Asset Valuation Bank, Corporate Project Management, Development Monitoring, Due Diligence, Building and M&E surveys Research market reports, statistics, take-up forecasting CB Richard Ellis has monitored worldwide Carrier Neutral Hotel supply statistics since 1999. This bulletin relates only to the European Carrier Neutral Hotel Tier 1 markets. Additional market statistics are available on request. For additional data centre market information please contact: Andrew J A d Jay Executive Director t: +44 20 7182 3461 e: andrew.jay@cbre.com Stephen Taylor St h T l Director t: +44 20 7182 3524 e: stephen.taylor@cbre.com

CB Richard Ellis has developed its market leading Data Centre Finder, which has become the go to site for occupiers searching for data centre space globally. If you would like your data centre to be listed on the site, please contact: Simon Moore: simon.moore@cbre.com

For a FREE, 3-week trial of iXNewsSearch please contact: Jonathan Heap t: +44 20 7493 7444 e: jheap@ixconsulting.co.uk j p@ g

Disclaimer 2011 CB Richard Ellis Information herein has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients and cannot be reproduced without prior written permission of CB Richard Ellis. clients, Ellis

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