Paris colos realize renewed growth on the back of cloud demand

Paris is the third largest multi-tenant datacenter (MTDC) market in Europe, but the city's providers had not been seeing as much growth as providers in London or Frankfurt. In 2016, however, a new wave of cloud providers came into the market, triggering new build and expansion plans, which could see the market add more than 140,000 square feet in 2017, with much of this space already leased.

But like all other European locations, Paris is affected by incoming EU regulations such as the General Data Protection Regulation. Although the Paris market could suffer some uncertainty following the UK's Brexit vote, it may also enjoy some opportunity as UK companies seek a European datacenter presence. The market also has its own challenges with suitable sites offering access to power that could affect its ability to build out at scale over time. 451 Research's Paris: Multi-Tenant Datacenter Market report, published at the end of last month, highlights the encouraging developments and challenges now being seen in the Paris colocation market as providers seek to expand to accommodate a new wave of cloud demand.

The 451 Take

For a number of years, we heard about providers' plans to build out in Paris. But not all intended builds became a reality. The market had suffered as a result of the economic crisis that hit Europe, and international companies – including cloud providers – found meeting French business requirements difficult. Furthermore, the market lacked the outside connectivity options of Frankfurt and Amsterdam, for example, which meant that most business in Paris was solely about meeting the needs of a French business, which was influenced by the French economy. Things are now looking up in France, from both a local and international perspective. Cloud providers are now seeing demand for hybrid cloud and are building out in Paris, with enterprises wanting to tap into these services starting to follow. A new wave of demand is also extending into the market from the Middle East, Asia and Africa through Marseille, France. As a result, Paris is now being used as a hub to deliver French-language content around the world, and we expect some services could follow.

Paris by the numbers

451 Research analysts currently track 55 active colocation facilities in the Paris market providing more than 1.8-million-square-feet of operational supply and 295 megawatts (MW) of UPS power. There are currently 25 providers in the market today, including a range of international providers with a pure-play approach and some local providers that have offerings further up the stack such as managed and telecommunications services. The market is largely made up of retail colocation operators, but the size of the wholesale providers in the market is not insignificant. Both Global Switch and DATA4 offer sizable campuses.

The Paris MTDC market was valued at an estimated $441m in revenue in 2016. 451 Research estimates it will see around 5% growth through 2017, ending up at approximately $464m. The metro market is the tenth largest in the world in terms of operational supply, and the third largest in Europe behind London and Frankfurt.

Providers in Paris continued to bring space online through 2016, which was marginally above 2015's new build figures, adding more than 99,000-operational-square-feet of new supply. This year, a number of large cloud providers will enter the market, and a number of Parisian providers have already promised build plans to accommodate their needs. This brings the figure closer to 140,000 operational square feet for 2017. The last time we saw such high numbers was in 2011 and 2012, when around 180,000 square feet hit the market with the entry of major providers such as Equinix and the expansion of Interxion. Many say this created a supply glut and depressed prices, but we are seeing providers build out again, with many citing space constraints in existing facilities, especially when it comes to winning large cloud deals with providers seeking 1-2MW. The market currently has a utilization rate of 77%. However, we expect this will decline to 76% in the year ahead, despite the additional supply coming online in 2017, much of which is being brought to market to meet the requirement of pre-sold larger cloud deals.

Trends beyond cloud

Similar to other European markets, consolidation has reshaped the market map for Paris in recent years, and we expect it will continue to do so as more providers start to put Paris back on the list for European build or expansion plans. The market is currently led by Interxion, which is closely followed by Equinix (18% and 17% market share when looking at operational square feet). Global Switch has 14% of the market, SFR 10% and Iliad Datacenter 6%. However, other providers such as Data4, which operates on the outskirts of Paris where it has access to land and power for further builds, are growing fast.

The market is also seeing some new and interesting trends around connectivity. Few thought Paris would gain from the growth seen in the Marseille market due to new subsea cable land points and traffic entering from the Middle East, Asia and Northern Africa. But French internet exchange France-IX says it is upgrading its points of presence on the back of demand for high bandwidth services because it sees some traffic using backhaul networks from Marseille to tap into Paris-based content options – in particular content in French that can be deployed in other French-speaking nations. It is also starting to see some savvy enterprises starting to leverage internet exchanges for low latency, lower cost access to services such as social media for staff or content services.

451 Research has covered more findings on the Paris MTDC market including detailed supply and demand forecasts, market provider profiles, a market map showing all providers and services offered and more trends in depth in our Paris: Multi-Tenant Datacenter market forecast. You can download and read the full report here.

Penny Jones

Senior Analyst - European Services

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