European Data Center Trends

We recently got the chance to sit down once again with Peter Jones, Chief Development Officer and founder at Yondr, and get his thoughts on the European data center industry. A Little Bit About Yondr and Pete For those unfamiliar, Yondr is a privately owned network provisioning company that offers modular data center designs: MicroBloc, MetroBloc, and HyperBloc. On one end of the spectrum is hyperscale, in the 10s to 100s of megawatts range. On the other end of the spectrum, tailored small scale deployments that help people enter new markets. Sometimes the small scale deployments are in places that have no colocation presence whatsoever. Yondr’s presence spans over three continents, employing over 300 people and still hiring as quickly as possible. Peter started off as an electrical engineer on the design side, before transitioning into delivery management for Digital Realty during their big EU expansion from 2009 to 2011. From 2011 to 2018 he was part of Google’s global infrastructure team, taking a year off in the middle to skipper a sailing yacht from the UK to New Zealand. In 4Q of 2018, he started Yondr with Dave Newitt and Miles Redding. They predicted an unprecedented level of network growth by the turn of the decade… but had no idea how much the pandemic would accelerate that need at a global level. 2021 has been a transformational year, with Yondr’s headcount constantly on the rise, and client demands ramping up in both frequency and scope. The EU Data Center Services Scene We asked about some of the real time trends in the EU, having seen the vacancy rates in Europe’s major data centers drop from 11.4% down to 7.5% over the last eight quarters. Peter noted that the drawdown in capacity was fated even before news of the pandemic started to spread. Additional capacity slowed down during the pandemic of course, and now there are either active or planned moratoriums on new builds in some of the five major markets. So, it’s not surprising that those numbers are coming down. In the broader market, there’s been an influx of new money, and thus new startups. But with no real pedigree amongst the new companies and a limited number of good locations to invest the available money, caution is at an all time high. Everyone knows that the need for bandwidth is there, but the trend in the late 2010s of failing projects and under deliveries is a specter that hangs over the industry. This is a temporary phenomenon in the EU. Eventually, the market will churn out winners and losers in the new industry startups, and those who execute successfully will be trusted with bigger investments and larger scale projects. There’s an amazing level of persistence right now; an obsession that causes companies to stick with the big five regions and absorb every possible watt of power and cubic centimeter of space rather than expand into nearby suburbs. The level of tolerance for long lead times and high prices in these areas is at an absurd high. Sure, there are massive day one costs to break ground in a new place. But with prices skyrocketing in these major networking metros, something has to give eventually. Clients in the EU are looking for big tranches (of both power and bandwidth) right now, either to consolidate their fragmented network hosting portfolio or to avoid fragmentation in the future. This is where some clients are tempted to push outward, away from the overpopulated metro areas… as long as they’re presented with a growth story they can really believe in.