Data centers conquer Switzerland – second highest density in Europe
The corona pandemic has shown in various ways how important the advancing digitization of society is. In recent years, the rise of online retail has had a profound impact on the retail and logistics real estate sector. Recently, however, data centers have developed into another interesting asset class with a risk / return profile somewhere between real estate and infrastructure investments. The increasing data consumption, which is additionally fueled by home office, video streaming, online gaming, e-commerce, etc., has once again highlighted the growth potential of this segment.
In terms of population, Switzerland already has an extremely high density of data centers, after the Netherlands it is even the second highest in Europe. The 93 colocation data centers identified in a current study by CBRE Switzerland have an area of at least 154,000 m2, which corresponds to around 22 football fields.
Zurich ranks sixth in Europe
With 68 megawatts (MW), the Zurich region ranks sixth in Europe after London (711 MW), Frankfurt (510 MW), Amsterdam (365 MW), Paris (204 MW) and Dublin (94 MW), which is what the data center Capacities. An increase in output by a further 50 MW by 2022 is already assured, as illustrated by various construction projects in Glattbrugg (Interxion), Winterthur (Vantage Data Centers) or Dielsdorf (Green Datacenter). More data centers are already planned, and this will double capacity in a few years.
The Swiss market currently consists of a mix of wholesale and retail providers. The major projects initiated in recent years are mostly so-called hyperscaler data centers, which are set up by Swiss or foreign operators and used by major international cloud providers such as Google, Oracle, Microsoft and Amazon.
Good economic conditions and sovereign data protection requirements
New customer wins from financial service providers, a growing fintech sector and the ongoing migration of international companies to the cloud have encouraged providers to set up cloud regions in Switzerland. Switzerland has its own data protection requirements, which promote sovereignty, but allow international companies to operate on a European basis without having to meet the requirements of the European Union (e.g. General Data Protection Regulation). Problems with the provision of land and electricity, long planning processes and compliance with sustainability criteria remain the most important challenges.
Even if the market for data centers in Switzerland is considered a niche, private equity firms and increasingly infrastructure funds are discovering this growth market for themselves. The data center market requires specific know-how that is different from other types of property. While traditional real estate investors are not yet showing much interest in data centers, they should keep a close eye on this market over the long term as it offers rapidly growing potential for alternative real estate investments.