Investor interest in the Polish data center market is not weakening. Buildings, expansions, hall adaptations and purchases of attractive plots – preferably with permits and power allocation. Cloud regions of the largest hyperscalers, pandemic, remote working, business continuity and accelerated digital transformation of companies only heat up the topic.

 

The year 2020 was clearly the best year in four years in terms of supply of new space on the data center market in Poland. However, it is only the beginning of another wave of large investments. The latest edition of PMR’s data center report “Data center market in Poland 2021. Market analysis and growth forecasts for the years 2021-2026” shows that the total capacity available to customers in the market of commercial data center services in Poland in 2020 was nearly 89 MW. In the perspective of six years this value will double.

Data centers market size (MW) in Poland

 

Warsaw market dominates

Conversations with data center service providers show that new investments and expansions can be seen in different parts of the country: in Wroclaw, Silesia, Tri-City, Cracow and Poznan. Nevertheless, the Warsaw market is the dominant center. Of all data processing centers and commercial server rooms in Poland, most operate in Warsaw. The latest data from PMR show that Warsaw accounts for 57% of the total commercial server space in Poland, which means that this share increased by approx. 3 p.p. during the year. Nearly 12% of net space is located in Cracow, and 10% in Poznan. The analysis of the 40 locations of the leading facilities confirms the trend of the dominance of Warsaw CPD locations, of which there were a total of 24 on the top list at the beginning of 2021 – two more than a year earlier. The investments planned in the near future make us assume that Warsaw’s share will continue to grow. Warsaw generates by far the biggest demand for datacentre services, including collocation. However, it is also the most competitive and demanding market. Further investments in the Warsaw market (e.g. Equinix, T-Mobile, ATM, Orange, Netia) will soon add 12,000m2 of new IT space for customers.

 

Market evolution: wholesale and retail division

We continue to expect a gradual increase in demand for colocation services in the country and the emergence of new foreign customers. New investments of foreign suppliers are of key importance, which will translate into increased revenues generated in the market by customers and from customers outside Poland. In practice, large investment projects often mean sales in the wholesale model and contracting customers even before the completion of the construction process. As a result, the market will increasingly change its nature and split into two separate parts: wholesale and retail. The signal for such changes was given by investments related to the cloud regions of the largest global providers (Google and Microsoft). In the coming years, in our opinion, the trend of dividing the market will further intensify. The size of the market in terms of supply of power and space in hyperscale data centers will definitely increase. Simultaneously, the retail market will develop, the growth of which will also be stimulated by large investments, popularization of cloud, especially the one in a hybrid model.

The American company Vantage Data Centers (VDC) is trying to obtain permits for the first stage of the complex in Warsaw. VDC has even announced launching the first 8MW module in 2021, but our investment site visitation shows that the work will be postponed until next year. The investor’s target plans are to build a complex with a gross area of 50,000m2 and a net IT area of 21,000m2. There is no other way to develop such a large area on the Polish market than in a typical wholesale model.

EdgeConneX is also implementing a large hyperscale investment in Warsaw. Equinix, on the other hand, is preparing its own hyperscale project on a plot of land located next to the aforementioned investment. In Q2 2021, the provider officially announced a two-year program to build 32 hyperscale facilities around the world with available capacity of 600 MW. The project will be developed as a joint venture in the form of limited liability companies jointly formed with GIC, a Singapore-based real estate fund. Upon closing of the transaction and completion of construction, xScale’s $6.9bn data center portfolio will span three regions (America, Asia and Europe), with a primary focus on Europe, including the Polish market. The exact distribution of xScale data centers in Europe is as follows: Dublin (three xScale data centers), Frankfurt (5), Helsinki (1), London (2), Madrid (2), Milan (1), Paris (4) and Warsaw (1). Equinix is looking to strengthen its partnerships with some of the world’s largest cloud providers, including Alibaba Cloud, Amazon Web Services, Google Cloud, IBM Cloud, Microsoft Azure and Oracle Cloud Infrastructure, which already have a presence in Equinix data centers.

Under the terms of the agreements, GIC will hold an 80% interest in the future joint ventures and Equinix will hold the remaining 20% interest. Equinix has already applied for the required regulatory approvals. In the case of the Polish market, a relevant concentration application was submitted to the Office for Competition and Consumer Protection in Q2 2021. The planned concentration consists in the establishment by Euro Rowan (GIC Group) and Equinix of a joint venture called EMEA Hyperscale 2 C.V. with its registered office in Amsterdam. The JV will be a holding company for a portfolio of hyperscale data centers located in various locations, and may also seek land to build such centers.

A very important factor for the development of the Polish market and related to the above changes is the experience introduced by new investors, who know very well the mechanics and realities of the data center industry on a global scale. It is even more important that these entities will successfully consolidate the market, as we expect. Among potential investors showing interest in the Polish market there are, apart from those mentioned before, also Interxion, KDDI, e-shelter and Digital Realty (DR). The latter is related to the long-awaited acquisition of ATM, the leader of the collocation market in Poland. The new owner of ATM in Q4 2020 will be Global Compute Infrastructure led by Scott Peterson, an American investor and one of the founders of Digital Realty, associated with the company for 14 years. At the end of last year, DR held stakes in more than 220 data centers around the world. Another participant in the transaction is a branch of Goldman Sachs bank, which specializes in capital investments in, among others, infrastructure projects. The estimated value of the acquisition is over PLN 530m.

In our opinion, the progressive concentration of capital in Poland and new investors is an absolutely paramount factor for the development of the market in the next few years, which will scale the level of revenue from data center services considerably upwards. It is impossible to assume that the entire list of major investment projects being pursued and planned by large investors is calculated in any other way than to generate an appropriate return on the allocated funds within a reasonable period of time.

 

Paweł Olszynka
ICT Business Unit Director
PMR

Baner long - Data centre market in Poland 2021

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