Secondary markets in Europe will experience significant growth in 2024, according to a report from JLL.

Madrid, Berlin, and Warsaw are predicted to see an average of 49 percent increase in their market size, while the FLAPD markets will continue to grow at a slower 16 percent.

Facilities in secondary markets, such as in Madrid, are expected to grow in capacity to match rising demand – Thinkstock

Secondary markets and emerging markets gain ground

Berlin, Madrid, and Warsaw are forecast to grow by 39 percent, 54 percent, and 59 percent respectively, according to JLL.

In 2023, 23MW of new supply was added in Madrid alone, a 27 percent increase in market size, while a further 58MW of new IT capacity is expected to be added in 2024, more than double the previous year.

Tertiary, or emerging markets, are also expected to grow by an average of 17 percent. Southern Europe and the Nordics are set to grow between 30-55 percent over the year.

Daniel Thorpe, data center research lead, EMEA, JLL, said: “We predict that data center developments will expand to locations where there is available power and land, meaning secondary and emerging markets, particularly in Southern Europe and the Nordics, will be critical in countering supply challenges.”

Primary market growth continues

The report said there will also be a 16 percent increase in data center supply across the FLAPD markets in 2024, with an expected 467MW of capacity to be added.

A total of 391MW of new supply came online in 2023, with 161MW added in the last quarter alone.

In 2023, takeup for data centers across the FLAPD markets reached a record 352MW, a 19 percent year-over-year increase.

Frankfurt dominated 2023 by market growth and take-up, with 119MW of takeup and 134MW of new supply.

A report from CBRE on the final quarter of 2023 said that the total supply of live data center space in London is more than 1GW, but Frankfurt is expected to surpass that mark in 2024.

JLL said London had a slow year of market growth but is expected to make a comeback in 2024.

Low vacancy rates drive up colocation rent

JLL said the low vacancy rates across European markets have led to rising colocation rent prices.

Pre-leasing activity also remained high with a total of 511MW of pre-lets in 2023, which is a six percent year-over-year increase.

Investment in the colocation sector more than doubled in 2023, reaching $2.34 billion in Europe up from $0.76 billion in 2022, said JLL.

Tom Glover, head of data center transactions at EMEA, JLL, said: “In a world increasingly fuelled by the Internet, data, and artificial intelligence, demand will continue to rise for the real estate to make it all happen. Data center demand shows no sign of deceleration. Power availability and increasingly tough sustainability performance regulations and reporting requirements are beginning to drive activity in Europe’s secondary markets.”

However, according to CBRE, Q4 of 2023 vacancy rates in the secondary markets were nearly double that of primary markets, at 19 percent, while FLAPD market demand outstripped supply in 2023. The demand for capacity in 2024, according to the report, will increase across Europe, particularly for hyperscalers.

The CBRE report added that this is the second time in five years that take-up has outstripped new supply, largely because of an imbalance in the FLAPD markets and pre-let capacity being delivered in Dublin, London, and Paris.