JULY 2 0 2 1

SPAIN
DATA CENTRES
HOW C L OU D INTER ES T IS C R EATING A NEW MAR K ET

EMEA Data Centre Solutions


I NDE X
❑ Why invest in data centres?
❑ Concepts and definitions
❑ The European data centre market
❑ Investment drivers
❑ The Madrid data centre market
WHY INVEST IN DATA CENTRES?
Data is often referred to as ‘the new oil’, such is our
growing reliance upon new technologies. This became
evident over the last year as we increased our online
working environments during the covid-19 pandemic.
The development of Industry 4.0 (which relies upon
technologies such as IoT, AI and automatization), cloud
computing, new internet applications and social media,
will ensure continued reliance upon exponential
amounts of data and processing power.
This data and processing equipment needs to reside in
a data centre that provides specialist environmental and
security features. As a result, the data centre industry
(offering leased data centre supply) has seen high
supply and demand growth in the last few years.

DATA CENTRE MODELS

❑ The impact of new submarine
cables in Spain HYPERSCALE
DATA CENTRE
❑ Expert opinion on the Spanish data Hyperscale refers to the largest
cloud computing and internet
centre market service providers in the world that
build their own data centres to
house cloud and other compute
platforms. These data centres tend
to be built large to achieve
economies of scale.
TELECOM
DATA CENTRE
Facilities owned and operated by a
telecommunications provider.
These data centres are often not
carrier neutral. They usually serve
customer needs for connectivity
services and cloud and hosted
services. Some of the telecom
companies offer colocation as an
addition to other services, but not
always the same level of neutrality.
© 2021 CBRE LIMITED
RETAIL COLOCATION
DATA CENTRE
A model were the operator retains
operational control over a data
centre and sells connectivity and
remote hands services alongside
server space. End users buy their
own servers to place in the site and
manage these. Most sites are
multi-tenant. Providers prefer
tenants that take 500KW of less,
though in recent years we have
seen larger retail colocation deals.
ENTERPRISE
DATA CENTRE
Facilities owned and operated by
the companies they support.
Typically, we are seeing many
companies that operate enterprise
data centres migrate out of these
facilities into retail or wholesale
colocation so they can gain access
to cloud and other services and
move CAPEX spending to OPEX.
WHOLESALE COLOCATION
DATA CENTRE
Wholesale colocation providers
focus on tenants with larger
requirements. In some cases, they
offer a whole building under a
single-let deal, or they can be
multi-tenanted, offering varying
levels of control (often fewer
services) over data centre
environments. In many cases
wholesale deals are done at
500KW and can be as high as
50MW.
MW
The data centre sector is
measured by megawatts
of IT load capacity
SPAIN DATA CENTRES | 2021
THE EUROPEAN DATA CENTRE MARKET CHALLENGES AND DRIVERS OF THE
DATA CENTRE MARKET
The four largest data centre markets in Europe are due to on-site construction and supply restrictions resulting
Frankfurt, London, Amsterdam and Paris (collectively from the covid-19 pandemic. Despite this, demand was at
referred to as the FLAP markets). As of Q1, 2021, these an all-time high of 201MW and we expect this will Land and Power Availability
accounted for almost 2,000MW of data centre supply, increase to 370MW this year. We will also see almost
double the amount seen in 2016. Demand from cloud 400MW of new supply come online! Such high demand is
Availability of land and large amounts of high voltage
computing companies (including hyperscale cloud leading to low vacancy rates across the FLAP markets and
power are becoming concerns in all European markets
providers) has accounted for much of this growth. The increasing interest in second-tier and emerging markets
where we are seeing increasing data centre demand.
Spanish market is only now starting to experience similar such as Madrid and Barcelona. Cloud providers are
cloud interest, which is leading to growth across its own increasingly looking to deliver services to local markets
market. Demand in FLAP over recent years highlights the from in-country, as opposed to in-region, and this is Data Protection Regulations
opportunities ahead for Spanish providers. leading to new growth across markets beyond FLAP.
The FLAP markets saw a slight decline in supply growth Learn more about the FLAP markets in CBRE Q1 2021 The implementation of the European Union’s General
last year, with 135MW coming online. This was largely Europe Data Centres report here. European Data Centres Data Protection Regulation (GDPR) has led to an
Q1 2021 | CBRE increase in the construction of data centres in Europe to
Figure 1: FLAP market full-year supply and forecast meet heightened requirements for European and even
in-country data residency. EU companies must store
MW personally identifiable data in an EU-based data centre
3.000 unless certain contractual arrangements are made. This
2.500 has meant many data processing and storage services
previously delivered from outside of the EU now must be
2.000 located in data centres in-region.
1.500
1.000
500 P olitical Stability
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F Businesses thrive in stable, highly functional
Figure 2: FLAP market annual new take-up and forecast environments, and the same is applicable to the data
centre industry. As a result, Europe is often used for
MW delivering services into other global regions, such as
400 Africa, where there is more operational risk.

300

200 Sustainability
100
The leased data centre market has been focused on
0 sustainability for efficiency and now enterprises are
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021F 2022F realizing benefits that come with using more sustainable
colocation options for their own supply.
Source: CBRE Q1 2021
© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021
INVESTMENT DRIVERS
The data centre mar ket across Europe
continues to attr act interest from the
investment community due, in lar ge part, to
the growing demand from hyperscale
cloud operators. The adoption of new
technologies and increased requirements
from enterprises wanting to outsource their
technology and data centre environments
is also leading to gr owth across markets
beyond FLAP. As a result, smaller second-
tier markets such as Madrid have seen a
high amount of activity in the last 12 to 18
months. This is like ly to continue with many
projects now at the stage of site se lection of
planning application.
The data centre sector has shown its
resiliency during the pandemic and is one
of the real estate assets that has benefited
from the covid-19 pandemic.
Institutional and infr astructure funds have
seen the benefit of investing in the growing
data ce nter sector. They are highly active,
and are now competing with private equity
investors for opportunities in the mar ket.
Traditional real estate funds are also now
contemplating ways to enter this market.
The first round of investment interest in
data centres focused on the FLAP markets
but these have become highly competitive.
Investors are now focusing more on
second-tier and emer ging marke ts such as
Madrid and Barcelona where more
opportunities for growth exist.
© 2021 CBRE LIMITED
GENERAL OVERVIEW – FLAP VS SPAIN
Figure 3: Spain – ¿ Future market?
Second-tier Market Growth
Europe’s second-tier data centre marke ts
include: Stockholm; Dublin, Zurich, Madrid,
Warsaw and Milan. These markets are
establishing themselves as new destinations
for hyperscale oper ators and investors
looking to capture new cloud demand. This
trend is reflecte d in the number of new
projects being de ployed in those cities.
Madrid, for example, has four new data
centers projects underway.
4 8
1
The Impact of covid-19
2
3 7
With so many activities going online, covid- 9
19 place d an inve stme nt spotlight on the 6
data centre industry. Since the pandemic,
we have seen the acquisition of US-based
wholesale pr ovider Edge ConneX (which is 5
building in Barcelona) by EQT, and the
closing of the acquisition of Interxion by
Digital Realty (Interxion has a data centre
presence in Madrid). We are also seeing
increasing interest in inve sting in emer ging
markets with acquisitions in Greece and S I ZE FLAP MARKETS S I ZE TIER II MARKETS
Croatia along other locations. We are also
1 - LONDON / 711MW 5 - MADRID / 70MW
seeing heightened interest in data centre
markets such as Barcelona. Over the 2 - FRANKFURT / 432MW 6 – MILÁN / 59MW
course of the next few years, we expect new 3 - PARIS / 208MW 7 – VIENA / 28MW
subsea cable developments and increased
adoption of cloud services will drive further 4 - ÁMSTERDAM / 396MW 8 – VARSOVIA / 32MW
interest in investment activity across the 9 – ZÚRICH / 69MW
Spanish market.
Source: CBRE Research
SPAIN DATA CENTRES | 2021

THE SPANISH DATA CENTRE MARKET
Madrid Market - Demand & Supply
Spain has a highly mature data centre
market, which is focused around the hub
of Madrid. Madrid is used to serve the
data centre requirements of the whole of
Iberia, which most other city locations
being used to service highly localized
needs.
The Iberian peninsula is gaining new
importance as a global data centre
desintation with the introduction of new
subsea cable developments. The Marea
& 2Africa (to be completed in 2022)
submarine cable projects will position
Spain as a key data center destination
for delivery of services and transport of
data traffic between Europe and the
Americas. They will also make Spain a
natural gateway to Africa. Much of the
activity stemming from these cable
developments will naturally find its way
back to the region’s make data centre
market of Madrid, where most services
and connectivity is delivered from today.
The Barcelona market – Spain’s second
largest – is also likely to see some
growth.
© 2021 CBRE LIMITED
Figure 4: Hosting and Colocation Data Centres
in Spain
Existing
The colocation data center development Pipeline
activity in Spain during 2020 already
reached unprecedented levels with new
projects in Madrid and Barcelona promising
to add an estimated 70MW of IT capacity
over the next 24 months – doubling existing
colocation capacity. The size of projects to
accommodate hyperscale developments has
also grown.
Colocation provider Interxion is building a Main data centres in Madrid
new 32MW data centre and other
international providers are looking to build
at scale.
The development activity still faces some
challenges where the availability of large
land plots in Madrid & Barcelona within
proximity to large amounts of high-voltage
power and fibre routes is extremely
constrained. These two critical factors, along Main data centres in Barcelona
with planning approval and eliminating
physical risk, are critical to developing these
facilities.
Source: CBRE Research
SPAIN DATA CENTRES | 2021
 REGIONAL SUBMARINE CABLE DEVELOPMENTS WHY INVEST IN DATA CENTRES IN SPAIN

Figure 5: New Submarine Cables Connected to Spain

Unique geographical location in the
centre of American, African and
E uropean continents

Connection with relevant new

submarine cables, which link to the
Americas and Africa

Strong internet growth, accelerated by

cov id-19

E xpansion of data centre markets

outside of FLAP as end users seek
proximity to local markets, strategic
connectivity hubs and in-country
presence

Stable and high investment yields

Source: CBRE Research

How submarine cables will open up new opportunities

Limited number of operators
Madrid is the lar gest data centre market in Spain but CBRE does expect to see some growth in smaller
locations such as Barcelona or Bilbao as a result of major submarine cable developments.
The 2Africa submarine cable will connect from Barcelona to 23 countries circumnavigating the African
contine nt. It is backed by a consortium of companies that includes Face book. The Grace Hopper cable that P otential for lower cost of energy based
will come online in 2022 will connect Bilbao to the UK and US offering an alternative to traditional subsea on local renewable sources
cable routes between Europe and the US.
© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021
EXPERT OPINION
The pandemic has accelerated
interest in the data centre segment in
Spain. Despite not being a star
country in the sector, large
customers have shown their interest
in the peninsula. From our
experience of more than 20 years in
the market, we have gone from
being just three companies in 2020
to seeing a huge explosion with the
arrival of large public cloud
providers, B2C platforms (e.g.
Facebook, TikTok, Netfllix, Disney)
and the needs of non-technological
companies to host their applications
close to network and cloud access
points. Consequently, this has led to
the entry of new players in Spain
such as Data4 or NTT among
others.
The top three public cloud providers
(AWS, Microsoft and Google) have
announced plans to deploy their
physical infrastructure in Spain.
While AWS will do so autonomously
with its own data centres, both
Microsoft and Google will do so by
deploying their infrastructure in
hyper-connected third-party data
centres.
This will undoubtedly expand the number of players in the market.
Spain's geographical location has helped to promote the
international visibility of our country for the termination of
submarine cables, an essential component of the backbone digital
infrastructure, together with the data centres for interconnecting
them. Likewise, these data centres in the centre of the peninsula
have become a magnet for attracting the physical infrastructure
(servers, routers, switches, etc.) of companies that provide digital
services and facilitate the distribution of content to users. Our
sector, also known as "MTDC" (Multi-Tenant Data Centers), is in
locations with a high concentration of population and GDP and
therefore where the demand for digital services is greater, as is the
case of Madrid, which has a strategic position in the centre of the
peninsula for both distributing and receiving content. Barcelona is
the second location with very interesting prospects for development
and diversification, so much so that it could be an
alternative/complementary destination to other more consolidated
markets such as Marseille (France), where there is a large
concentration of cables interconnecting Asia Pacific, the Middle
East and East Africa.
With an average annual growth of around 15%, mainly in large
markets, there is a trend towards a concentration of larger centres.
Corporate data centres are increasingly being outsourced for
advantages such as better security, lower costs and higher quality
of service. This is leading to the closure of smaller corporate data
centres and those that remain due to their large critical mass are
much more energy efficient according to data from the
International Energy Agency (IEA) which monitors the energy
efficiency targets of multiple business sectors. In the last ten years,
internet traffic worldwide has increased 12-fold, IT load in data
centres by 7.5 times, while electricity consumption has remained
the same.
Public Cloud Computing technology is mostly American, initially
driven by the first Obama administration, which promoted the
Cloud-First policy for public administration, saving, according to
official figures, around 6 billion dollars by closing obsolete data
centres, contracting Cloud services and concentrating their servers
in an external provider.
It is difficult to estimate whether Spain will reach the levels of the
so-called FLAP markets, but what is certain is that we are on the
way to closing the gap thanks to the large capillary
telecommunications network that our country possesses.
In fact, from the city of Madrid alone, the entire peninsula can be
served very easily thanks to large fibre optic and FTTH networks,
something that few countries can boast. If we compare the installed
rate of data centre capacity measured in MW IT with the GDP per
metropolitan area, for Madrid to reach the level of London or
Amsterdam, the current capacity would have to be multiplied by 7
and 14 respectively. This highlights the huge potential for growth.
In fact, in two years' time, we estimate that the capacity of the
market will double just with the expansion plans we have in place,
both from Interxion and other suppliers.
In terms of the investment market, capital comes mainly from large
data centre operators, listed companies, although an increasing
number of independent funds with new brands are also investing in
this sector. The key factors for our sector are the concentration of
networks, the interconnection of companies within our data centres
and the availability of large electrical power capacities.
As major challenges, we would highlight being an active part of the
electricity planning in the area where we are located, greater
certainty in the processes for obtaining licences/permits and less
bureaucracy within the Public Administrations. Another challenge,
or rather desire, is for the Public Administration to recognise us as
a key productive sector due to our high contribution to GDP, so
that the Public Administrations disseminate the sector's strategic
value with greater communication outside Spain. According to a
study carried out by independent consultants for Interxion, we
concluded that for every euro invested in large data centres
(MTDC), between €9 and €12 is generated, depending on the
policies applied to promote and strengthen the sector. There is
confirmed private sector investment of €680 million in Madrid
between 2020-2025, which is estimated to generate a GDP wealth
effect of more than €8 billion and around 2,500 jobs (direct,
indirect and induced).
Finally, this sector could be one of the great levers for the
development of the renewable energy sector, as the electricity
demand of companies such as Interxion is 100% renewable
energy.
All in all, there are many arguments that augur a more than
promising future for the data centre sector in Spain.
Robe rt Assink
G e neral Manager Interxion
SPAIN DATA CENTRES | 2021
C ONTA C TS

ANTHONY LABADIE LOLA MARTINEZ PENNY MADSEN-JONES

Director Director Director EMEA Data Centre

Data Centers Solutions Research Research
CBRE Iberia M +34 915143941 Data Centre Solutions
T +34 915 981 900 Lola.martinez@cbre.com M +44 7748 769 593
anthony.labadie@cbre.com Penny.madsen-jones@cbre.com

MIRIAM GOICOECHEA CONCEPCIÓN MINGUEZ

CBRE can offer more detailed
Associate Director Senior Research Consultant insight into the spanish market
Research Research including country-level consulting
M +34 607 098 266 M +34 991 514 3855 reports. Please contact
Miriam.goicoechea@cbre.com concepcion.minguez@cbre.com Penny.madsen-jones@cbre.com
for further information.

CBRE Disclaimer 2021

CBRE Limited confirms that information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt their accuracy, we have not verified them and make no
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© 2021 CBRE LIMITED SPAIN DATA CENTRES | 2021