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Report highlights emerging markets like SA

Major global data centre markets are experiencing soaring construction costs as development in new and emerging hubs, including South Africa, continues to increase.

The intensification of investment in leading locations in the global data network has been a trigger for these escalating costs, according to Turner & Townsend’s Data Centre Cost Index 2019.

Globally, more than 40% of markets surveyed are showing “hot” construction conditions – where competition for supply chain resources is putting pressure on budgets.

The research analyses input costs – including labour and materials – across 32 key markets, alongside industry sentiment and insight from data centre professionals.

The report points to the rise of new hot spots across the globe as technological investment in emerging economies takes hold. On the African continent, in Nairobi, Kenya, average build costs stand at $6.5 (about R94) per watt on the back of investment required to meet the government’s focus on digitisation of the economy and in response to the arrival of tech giants.

South Africa is highlighted as another emerging market on the continent.

With total GDP exceeding $315bn (about R4.5 trillion), internet literacy stands at 55% among its 58 million citizens. Based on data centre density, South Africa is ranked 23rd globally on Cloudscene.

Nairobi has risen three places from last year’s table to position 20, indicating the spread of market activity across sub-Saharan Africa, says Dan Ayley, global head hi-tech and manufacturing for Turner & Townsend.

“It’s still more expensive to build a data centre in Nairobi than Joburg, which remains in cost spot 25 with average build costs of $6.2 per watt.”

With several submarine cables connecting South Africa to Asia and Europe, Joburg has up to 52 internet users per 100 people and the connectivity ecosystem is made up of 60 co-location data centres, 319 cloud service providers and six network fabrics.

The report says data centre construction markets in both Joburg and Cape Town are hot, with key projects coming to fruition and hyper-scale investments increasing. South Africa is being seen as a stepping stone to the rest of the African continent.

“South Africa’s data centre industry is thriving, with Johburg its single largest market by some margin – twice the size of Cape Town. Last year saw an increase in market size in both Cape Town and Joburg,” Ayley says.

Global demand for new space for data centres looks set to continue into this year, with just 9%of respondents to the research believing demands have been met in their markets in the last year – down from 12% in 2018. Of those surveyed, 70% highlighted the impact of data sovereignty and data protection acts – including those being brought in by the EU, Switzerland and Kenya – as a major catalyst for demand. 

The most significant limiter on growth over the next five years is seen as availability of power, especially in the context of pressure on the industry to decarbonise.

In Turner & Townsend’s survey, the industry is split 50-50 on whether technological advances with solid-state batteries alongside green energy sources can render traditional fossil fuel generators obsolete.

Data continues to be one of the most valuable commodities and, as deals get bigger and more profitable, Ayley says investment in both established hot spots and emerging markets increases, putting pressure on cost and resources.

“Although our report points to certainty in delivery as the key issue for the sector across global markets, sustainability is one of the most pressing challenges coming down the track.

“With power density requirements for data centres increasing by as much as 50% year on year, it demonstrates that steps towards decarbonisation need to be a priority for how hubs are conceived, built and operated across their life cycle.”

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