The EG Interview: Equinix’s UK boss on the year of the data centre

Data has been king this year; the lifeblood of businesses that have operated remotely under Covid-19 lockdowns. According to research from Californian data centre specialist Equinix, interconnection bandwidth – used to measure the transfer of data between companies – is set to grow by 45% in the next two years in the EMEA region, fuelled by a rise in remote working. London has emerged as a data centre hotspot. Its interconnection bandwidth growth is expected to be at least three times that of Paris and more than twice that of Amsterdam. And it is this surge in growth that provides a golden opportunity for data centre providers such as Equinix, says Russell Poole, the company’s UK managing director. Poole has been tasked with running and growing Equinix’s presence in the UK, building up a portfolio of 13 data centres across London, Slough and Manchester, and he says the country will continue to be one of the world’s most critical markets. But could Brexit present a threat to the UK’s global data centre platform, and will Covid-fuelled data centre demand continue once the pandemic passes? Covid as a catalyst Driven by the Covid crisis, investment in data centres in Europe has soared. According to Knight Frank, investment into the asset class hit £23.5bn in the first half of this year compared with historical annual investment figures of around £4bn. Poole says this investment explosion has mainly been driven by the requirements of “hyperscalers”; companies – usually tech giants such as Facebook or Google – that require vast amounts of data centre space. But demand for these assets was already growing pre-Covid. “The money that has come into the market over the past six months – some of it was already destined to be [invested in data centres],” he says. “We may have seen some acceleration effect from Covid on that, but what we are seeing is a general trend of the requirements of hyperscalers growing.” Equinix was already preparing for this growth before Covid hit. In 2018, the number of hyperscale data centres around the world increased by 11% to 430, according to Synergy Research, and hyperscale data centre operators spent more than $26bn during the third quarter of 2018 alone. The business case for investing in the creation of more of these data centres was strong, and in July 2019, Equinix joined forces with Singaporean sovereign wealth fund GIC in a $1bn joint venture to develop and operate hyperscale data centres in Europe. Equinix will deliver six such centres under the jv: one in Paris, one in Amsterdam, two in Frankfurt and two in London. Covid might have added to trends that were already in play, but the impact of homeworking has been undeniable. Covid has “accelerated a mobile workforce”, Poole says, and as a result has boosted requirements for businesses such as Zoom (one of Equinix’s customers). As much of the UK’s workforce continues to operate remotely and requirements for data centre space grow, will be see the demise of the office? “What has been fascinating through this process is that some people have really recognised the value and benefit of not having a commute, and the ease and convenience of working from home,” Poole says. “Some people have adapted to it really well, and said that they will carry on. There are others who are missing the human interaction. “I think we will use the office differently. There will probably be a lower overall demand for office capacity as more people choose to work from home more frequently, and a rise in hotdesking and more collaboration workspaces than traditional office environments.” Brexit’s threat The UK is an important market for Equinix. The company has invested more than £940m to build and bolster its presence in and around the capital, including a £295m investment into creating its Slough campus. But as the UK leaves the European Union, concerns have been raised over the impact of Brexit on the data centre market, especially cross-border data transfers. A white paper by trade association techUK on the impact of Brexit on the UK’s data centre market said the UK needs to “play catch-up if we want to remain relevant”. Further concerns were raised on Brexit’s effect on the sector last March, when Ladbrokes owner GVC said it was planning to relocate servers hosting its online betting platforms to the Republic of Ireland, citing Brexit uncertainties. But Poole remains bullish on London’s data centre future. “We have continued to make substantial investments into the UK, and we have continued to see strong demand build in the UK, particularly in the financial services market,” he says. “[The] expectation post-Brexit is that London will remain a premium market, and that’s certainly the market sentiment. When you have the magnetism and the gravity of the London markets, moving that is not something that is desirable or feasible.” When you have the magnetism and the gravity of the London markets, moving that is not something that is desirable or feasible – Russell Poole Manchester is also of growing interest to Equinix. The company entered the market four years ago, and since then there has been a “tremendous acceleration in demand”, Poole says. This growth has been echoed by Manchester City Council. Its strategic director of growth and development, Louise Wyman, said earlier this year that there is a “huge amount of interest” in the city as an emerging location for data centres. But as demand for data centres grows, an inevitable tussle occurs. More data centres mean more resources are needed to fuel an already notoriously energy-guzzling asset class. Computer infrastructure, along with the internet, is set to use as much as 15% of the world’s electricity by 2030, emitting up to 7% of the world’s energy-related carbon emissions, according to researchers at Huawei Technologies Company. The world’s biggest data centres may require more than 100 megawatts of power, which is enough to power 80,000 homes, according to thinktank Energy Innovation. The reason data centres are so power-hungry comes down to the volume of energy required to cool their servers and systems. According to Energy Innovation, this process accounts, on average, for 43% of data centre electricity use – the same amount of energy needed to power the data centre servers themselves. Amsterdam’s ban The sheer amount of energy needed to power data centres has caused some major issues in some parts of the world. Amsterdam banned the construction of data centres in July 2019 because of the strain they were putting on local power resources. The ban came to an end earlier this year and the city now proposes that new data centres should only be built in specific areas and must meet strict guidelines over power usage effectiveness. Is Poole concerned that other countries might put bans in place similar to Amsterdam? He says the solution is to accelerate more sustainable ways of operating data centres. “The industry overall, and Equinix, is driving really hard on energy efficiency,” Poole says. “Of course, data centres consume electricity, and their growth drives up that consumption. The responsibility on Equinix and on other companies is to do that as efficiently as we can, to consume as little energy as possible.” He says there has been “tremendous development” in data centre design and technology, particularly around methods in cooling down servers, over the past decade. “The amount of energy we use has, overall per customer deployment, dropped, as we are using less energy to manage the heat output of our customers’ equipment. “We feel a social obligation to do that and there’s a commercial imperative in terms of the cost profile of the business.” This year has truly put data centres on the map as one of the hottest asset classes in real estate. And with plans to build a number of hyperscale facilities in London, Equinix is placing itself at the forefront of the market. The industry, including Equinix, must ensure that the growth of the sector does not come at the price of the environment. To send feedback, e-mail lucy.alderson@egi.co.uk or tweet @LucyAJourno or @estatesgazette Photos: Shutterstock (featured image) and Equinix