The recently enacted Data Protection Act 2019, is promising to open doors to a relatively new type of real estate investments that are based on the rapidly growing technology sector in the middle of a generally cool market. A new report by Turner & Townsend points to data sovereignty as a catalyst in creating demand for data centres.
The report highlights the effect of EU data protection laws and similar legislation in Switzerland and Kenya as having the effect of increasing demand for data centre facilities. The firm reached the conclusion based on 71 per cent of responses in a survey carried out to establish the state of data centre markets globally.
90 per cent of respondents in the survey said they expect data centre demand in 2020 to increase globally compared to 2019 while 54 per cent consider the industry to be recession proof.
In addition, results of the survey which are compiled in the Data Centre Cost Index point to the rise of new hotspots across the globe as technological investment in emerging economies takes hold. As the technology industry has grown bigger, tech companies have also expanded market reach and products.
These developments are expected to increase demand for land, labor, materials and other inputs needed for setting up data centres.
Current data centre construction costs in Nairobi are estimated at $6.5 US per watt on the back of investment required to meet the government’s focus on digitization of the economy and in response to the arrival of tech giants.
Early actors have already undertaken data centre establishments in Nairobi, in anticipation of tech developments. Nairobi based Africa Data Centres is the biggest data centre in sub-Saharan Africa, outside of South Africa while Amazon Web Services have recently announced plans to set up an Amazon EDGE location in the country as it expands into Africa.
In the index, Nairobi has risen three places from last year’s table to 20th position indicating the spread of market activity across Sub-Saharan Africa. However, it is still more expensive to build a data centre in Nairobi than Johannesburg, South Africa which is ranked 25th in cost. All of the 32 markets surveyed in the report are experiencing growth
Global demand for new space is set to continue growing in 2020, with just nine per cent of respondents to the research believing that data centre demands have been met in their markets in this year, down from 12 per cent in 2018.
Dan Ayley, global head of hi-tech and manufacturing at Turner & Townsend said, “Data continues to be one of the most valuable commodities. As deals get bigger and more profitable, we are seeing investment in both established hot spots and emerging markets heat up- putting pressure on cost and resources.”