The European data center industry, while showing optimism with a number of expansion projects in the colocation market, is still behaving cautiously, according to the latest statistics collected CB Richard Ellis.

Retail colocation expansion projects have been seen in the last quarter by the likes of Interxion (with a 7640 sq m phase 2 build in Zurich-Glattbrug), EvoSwitch (a 5,000 sq m expansion in Amsterdam) and Hetzner Online (which plans to build 39,950 sq m in Germany), but build activity in the UK has been limited.

UKGrid, iomart and Sentry42 are just some UK operators that have announced expansions, but closer to the City of London, the key financial district, operators are being more cautious, according to CB Richard Ellis executive director Andrew Jay.

Most operators have followed 2010's "subdued" lead in terms of take-up and supply with a cautious approach to building out as operators in the UK and rest of Europe wait to discover just how austerity measures will effect government and business IT service requirements.

"For the most part, 2011 has begun in the same way [as 2010], perhaps a further indication that whist there is some renewed optimism, a level of caution still remains, with the changing outlook for the European economy of particular concern," Jaye said.

"As a consequence total market take up for the year is likely to show marginal improvement from 2010, reflective of the improving market conditions." 

Jay said the European Tier 2 markets have experienced growth and that these will "provide a much needed boost to depleted levels of available space across the European Tier 1 markets which now record a fully-fitted vacancy rate of 7.4%" - an all time low.

Austerity measures in the corporate sector will have restricted IT spend in the corporate sector since 2008, according to Jay, but many companies are now looking to take on a much longer-term view to IT, which could lead to further market recovery.

Cloud computing requirements are also likely to push the industry forward.

In 2010, supply levels for the Tier 1 market grew by only 5% - it's lowest rate since 2006 -- but demand levels have also been lower. Today's vacancy rate for Tier 1 in Europe now stands at 19%, up from 22% at the end of last year, and providers are now looking to add space to meet a future predicted growth in demand.

"In the short term, a further tightening of vacant supply is likely before the arrival of new stock towards the end of the year," Jay said.

He said Europe is seeing the re-emergence of its colocation sector, driven by an increase in corporate IT spending on expansion and improvements to IT infrastructure especially in London.

"Our discussions with operators have shown that much interest is being expressed in the market although transactions are taking longer to complete," Jay said. 

"We expect to see an increase in take-up of retail colocation space in subsequent quarters as this interest turns to transacted space."

Overall, things are looking positive for the colocation space. 

Jay said CBRE believes the "bottom of the current market cycle has been reached", and that these first quarter figures show the market for both Tier 1 and Tier 2 is improving overall.

These may not be seen in financial figures yet but more interest has been experienced and new demand will lead to new clients.