Bouyant Market for Data Centre Construction in the UK

The market for data centre construction is estimated to be valued at around £1.1bn in 2013, following two years of exceptionally high level growth. However, while take-up rates continue to increase, data centre construction output is likely to fall from 2014 onwards as demand is absorbed by the relatively high levels of existing vacant space.

Market performance has otherwise been variable, with falls during 2009 and 2010 as a result of the economic downturn affecting a number of key sectors for data centres, such as financial services and retail. Subsequently there was a return to growth in 2011, and data centre construction activity was at a very high level throughout 2012 and into 2013.

This was due to the growing interest in cloud computing in combination with improving business confidence, which led to a release of projects previously on hold. Energy efficiency is another key driver of market growth. The effects of improving energy efficiency in data centres can be seen immediately, bringing the additional benefit of substantial savings on operational costs, of which power accounts for a large share. This has driven demand for modular solutions, from rack-based solutions to complete data centre pods and containerised solutions.

One key trend that may affect the market negatively in the longer term is that of data centre consolidation. The government, as well as a number of private businesses, have announced plans to consolidate their data centre estates and move operations to fewer, larger and more efficient data centres. The full impact of this is yet to be seen in the market.

In terms of contractors, the data centre construction market is extremely fragmented. While most large M&E contracting businesses are key players, companies involved in data centre construction range from major building contracting groups and commercial developers, to data centre specialists and operators, modular building manufacturers and IT equipment suppliers. It is likely that further consolidation will take place among operators, specialists and construction/engineering firms in the near future, as the market remains characterised by a large number of new entrants and small market shares, even among the established leading players.

Demand is expected to continue to grow, particularly from technology, media and content providers, with the financial sector also expected to pick up following some definitive signs of economic recovery in early 2014. However, much of this demand is likely to be absorbed by existing vacant data centre space as more businesses opt for the co-location model. The impact of the government’s data centre consolidation project is likely to lead to a reduction in the value of RMI and upgrade spend in the sector from 2015 onwards.

It is estimated that between 2014 and 2016 the market will continue to decline in value terms, however, by 2017 it is expected that the amount of vacant space will have reduced and build levels will have started to rise again. The market is forecast to once again exceed £1bn by the end of 2018.

Keith Taylor, Director of AMA Research, said: “It appears that data centre construction is emerging as a significant sector in its own right, and one key trend seen over the past 2-3 years is that of integrated service offerings. Commercial operators and data centre specialists now offer a wider range of construction services and product/equipment suppliers are targeting whole ranges specifically at the data centre sector. These often include software solutions for monitoring and management as well as design & build services.”

The ‘Data Centre Construction Market Report - 2014-2018 Analysis’ report is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.