At CBRE we see an increasing number of client enquiries and investor interest for data centres in the Nordics. The growth of cloud computing and the increasing scale of end-user demand is fuelling the accelerated development of new data centres and this alternative real estate sector continues to entice capital from a growing pool of investors. Jussi Niemistö, part of CBRE’s Nordics Research Team, tells you how data centres are keeping the Nordic countries connected.
Data centres are playing a critical role in keeping the Nordics literally online, as they provide the infrastructure where everything digital is stored and processed. Data centres are the reason we can have Zoom/Teams calls, shop online, watch Netflix and stream live sports, play video games and connect with family and friends using social media. All the applications we are using to function effectively during COVID-19 are ultimately powered by data centres, and therefore the role of the data centre today is critical for all aspects of life.
The cloud-native Nordics
The Nordic governments are eager to attract large industrial investments such as data centres to their own soil and are trying to keep up with the growing competition between countries by offering attractive investment terms, government subsidies and supportive legislation. The Nordic countries are global leaders in the Global digital economy and Denmark, Sweden, Norway and Finland are actively engaging in a multitude of digital ventures, including 5G networks, Internet-of-Things (IoT), industry digitalization and e-commerce activities.
The Nordic countries continue to rank at the top of the EU Digital Economy and Society Index (DESI), which measures the digital competitiveness and tracks the evolution of digital services between EU countries.¹ The percentage of Nordic enterprises using cloud computing services is the highest in Europe, according to Eurostat data (Figure 1.).²
Figure 1. Adoption of cloud computing by enterprises (Eurostat 2020).
Cloud companies leading the way
The players in the data centre market are cities and municipalities, large and medium sized companies (own DCs), third-party providers (Equinix, Hetzner) and hyperscale cloud companies (Amazon (AWS), Microsoft (Azure), Facebook & Google). In recent years, several large tech companies have established data centres in the Nordics and Apple, Facebook, Amazon and Google have developed hyperscale data centre operations in the Nordic countries.
CBRE research shows that 80% of current take-up of data centre capacity in Europe originates from cloud companies. The applications that are being run by the big tech companies are seeing record usage and therefore utilization of data centre capacity is growing.
Great location for data centres
The Nordics continue to be a favourable destination for data centres due to their political stability, reliable power grids, low energy prices and strong governmental support. The annual construction investments into data centres will continue to grow from €2.6 billion in 2020 to €4.3 billion 2025³ and a growing number of investors are looking to increase allocations to Nordic data centres. The trends supporting the Nordic data centre market will remain strong.
Conclusion
The megatrend of cloud computing and the solid growth of data usage continues to fuel the Nordic data centre expansion. There is a growing pool of investors and deployable capital looking at alternative sources of income from data centres in the current low-rate environment and the Nordics continue to be suitable locations for both domestic and international data centre operators. Data centres are keeping the Nordics connected and the accelerated growth for the data centre market is expected to continue.
Please contact Jussi or his Research colleagues in the Nordics:
Notes
¹ The Digital Economy and Society Index (DESI) 2020
² Eurostat: Cloud computing - statistics on the use by enterprises 2018
³ Nordic Council of Ministers 2018
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