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'Everyone Wants A Piece Of Data Centers Right Now': Digital Realty, Equinix Seize Growth Opportunities In Europe

Data center giants are looking to Europe to power their next phase of growth. 

Digital Realty and Equinix, the two largest colocation providers in the world, both reported robust growth and big ambitions in Europe as the U.S. market matures. Recent financial results also spotlight their differing expansion strategies in the region. 

With investors taking a much closer look at data centers this year, Equinix and Digital Realty showed robust overall growth in the third quarter. Both companies, which lease out data center space to a range of customers, topped already-high revenue forecasts. In a year of plentiful, cheap capital and soaring demand for cloud services, it’s clear that growth is the top priority for major colocation players.


Digital Realty commissioned 1,442 megawatts of capacity in EMEA last quarter, which also marked a rare quarter in which wholesale leasing in Europe was greater than in North America. EMEA is a common designation for Europe, Middle East and Africa in financial reporting. 

“In terms of Europe and EMEA ... you look at markets like Frankfurt, Amsterdam, Zurich, Marseille, Stockholm, we have assets in each of those markets under construction and really being driven by customer demand,” said Digital Realty Chief Investment Officer Greg Wright, on a shareholder call. 

In March, Digital Realty closed an $8.4B merger with Netherlands-based InterXion, a colocation provider with more than 50 facilities across 11 European countries. The blockbuster deal created a global data center giant — the combined organization boasts 280 data centers in 48 metros across 23 countries — and revved up Digital Realty’s growth in Europe. 

During the quarter, the company secured new deals in Zurich, acquired land parcels in Vienna and Madrid, and opened a third data center in Marseille. Digital Realty also acquired Altus IT, a data center provider in Croatia, in a deal designed to establish a “gateway to Southeastern Europe,” said Digital Realty CEO Bill Stein. Earlier this week, the company also snapped up Lamda Hellix, a colocation and interconnection provider based in Greece, which further bolsters its footprint in the emerging hub. 

The largest data center markets in Europe are Frankfurt, London, Amsterdam and Paris, and the so-called FLAP markets provide a barometer of what’s taking place across the continent, said Penny Madsen-Jones, director of EMEA data center research at CBRE. 

The growth in first-tier markets has been largely driven by demand among the hyperscalers, such as Amazon, Facebook and Google. Those hyperscalers rely on third-party colocation providers to house their ever-growing troves of data, and that has led to intensifying competition for land in first-tier markets, alongside growing interest in smaller markets. 

“Data centers require land, but they want to build near where the hyperscalers are,” Madsen-Jones said. “It’s fair to say every market is being considered at the moment outside of the big four.” 

Zurich, Milan, Madrid and Warsaw are some of the second-tier markets gaining data center traction, according to CBRE. Milan, for example, is expected to double its data center stock by the end of 2022 according to CBRE, and it is seeing larger deals and developments driven by growing interest from hyperscalers. 

“Over time, where we see cloud adoption taking off, it tends to spur activity in some of those markets,” Madsen-Jones added. 

For now, soaring cloud adoption spells big opportunities for colocation providers. 

Last quarter, Equinix notched 16% revenue growth in EMEA, its fastest-growing region by a wide margin. Its total revenues in EMEA were $518M last quarter alongside a utilization rate of 84%, the highest of any region. 

Equinix boasts the largest cloud on-ramps of any data center provider in the world, making it an attractive choice for enterprises that rely on multiple cloud infrastructure services, such as Amazon AWS, Microsoft Azure or Google Cloud. Equinix counts all major cloud providers among its customers, and they generate a major chunk of Equinix’s total revenue according to Morningstar.

In contrast to other colocation providers, Equinix emphasizes network density in its facilities, housing multiple telecommunications networks, cloud providers and enterprises. 

That’s an increasingly important feature, with Equinix’s customers paying a premium to connect directly to other enterprises within Equinix’s data center network. Demand for interconnectivity is particularly high in Europe, with bookings “substantially up” last quarter according to the company. 

Underscoring the region’s significance, Equinix also noted that more than half of its major expansion projects are in EMEA, including four hyperscale projects tied to a joint venture with GIC, Singapore’s sovereign wealth fund. 

Equinix and GIC formed a $1B venture in October 2019 aimed at developing and operating hyperscale data centers in major European markets. In April of this year, the two firms formed a second fund for data center development in Japan. 

Taking advantage of sky-high investor interest in data centers, other colocation firms are also forging alliances with deep-pocketed financiers to fund expansion in Europe. Boston-based Iron Mountain, for example, recently formed a multimillion-dollar venture with AGC Equity Partners, a London-based alternative asset manager, to develop a 280K SF hyperscale data center in Frankfurt.

“Everyone wants a piece of data centers right now,” Madsen-Jones said. “If you’ve been investing in other asset classes, data centers are a safer bet right now.”