In the face of the global climate emergency and the European energy crisis, data centres are under increasing pressure to reduce their carbon footprint and enh...
5 things to know about the GCC data centre market
The GCC region has seen huge changes in the data centre industry in recent years – and there’s a lot more change to come, writes Henry Sutton, founder of the Gulf Data Centre Association.
Updated October 18, 2023 / Original October 18, 2023
By Henry Sutton
Founder, Gulf Data Centre Association
October 18, 2023 | 11:35 PM BST
We’re taking a look at key five things everyone should know about the data centre market in the region, from its position as an underserved market to its ambitions to become a global tech hub.
1.It’s an underserved market
The GCC region has been underserved for a long time. To date, there is not enough capacity available to meet population numbers and very few international players currently operating in a market that has historically been predominantly telco dominated. The GCC data centre market size for instance sits around 500MW compared to 2,536MW in FLAP+D.
But the need for increased digital infrastructure is booming in the GCC. With a huge surge of enterprises moving to cloud, the adoption of new technologies, particularly AI, and strong forward momentum from government entities to develop new infrastructure, there is high demand for data centre colocation and hyperscale use throughout the region.
Indeed, the Kingdom of Saudi Arabia (KSA) alone is estimated to reach 25-30% CAGR by 2030. With a total population over 35 million, two-thirds of which are under 35 and early tech adopters, the Ministry of Communications and Information Technology (MCIT)’s allotted US$18 billion investment in hyperscale data centres and renewable energy by 2030 to grow the market supply to 1,300 MW by 2030 is not so farfetched.
2.The region is opening up
The good news is that the GCC is opening up and propelling forward politically, economically, and infrastructure wise – leaving a huge amount of potential in its wake.
Moreover, with established laws, regulators and systems now in place across the region, established international players are able to more easily enter the market. While regulations are in their infancy and need time to mature, trade agreements are on the way up and the ability for foreign investors and businesses to set up has eased dramatically with the likes of Free Zones and 100% company ownership very attainable.
Bahrain for instance has an open telco market and its government’s Cloud First Policy has opened the market to international cloud players. Meanwhile the Salalah Free Zone in Oman is offering international data centre investors top incentives, infrastructure and logistics capabilities with close proximity to subsea cables such as 2Africa, Gulf2Africa, India Europe Xpress and Raman.
If you’re looking to enter the market, then there is undoubtedly a huge amount of desire and potential in the region to grow the data centre market now and in the future.
3.There’s an abundance of low-cost power
In the GCC however, the cost of grid power is significantly lower:
- UAE: US$0.011 per KW
- Qatar: US$0.036 per KW
- KSA: US$0.048 per KW
- Kuwait: $0.065 per KW
- Bahrain: US$0.07 per KW
- Oman: US$0.156 per KW
With the amount of energy being used by data centres ever increasing, currently up to 1.5% of global electricity demand, according to the International Energy Agency, lower power costs is certainly no bad thing.
4.Opportunities are everywhere
It’s not news that there is tough competition in established markets. As well as soaring power costs, operators are struggling to meet demand with 92% of data centre professionals across the UK, Ireland, Germany, France, the Netherlands, Norway, and Sweden, reporting delays due to supply chain issues. The global shortage of available supply has also led to increased capacity prices, with Singapore shelling out rental rates of $300-$450 per month for 250-500 KW requirements.
In addition, obtaining planning permissions and getting the go-ahead on new data centre developments has become increasingly difficult against a backdrop of resistance from local councils. Dublin is unlikely to have any new grid connections until 2028 due to South Dublin County Council’s ban on new data centres, the Netherlands continues to see data centre development issues, and in West Virginia, proposed data centre plans are even causing political upset.
There’s a different story in the GCC, however. As well as more sustainable power prices and supplies, there is an abundance of new infrastructure, available land, and affordable real estate – not to mention strong government backing from each GCC country to build a huge amount of new capacity that will bring economic benefits to their respective markets.
Alongside KSA’s Government-backed US$18bn investment, Kuwait’s Government recently approved three new Google data centres, and Microsoft’s cloud data region in Qatar, which will bring over 35,00 new jobs and US$18bn to the country’s economy in the next five years, is supporting the Qatari Government’s National Vision 2030 to create a sustainable, diversified economy.
While some red tape is still inevitable, the fact that new developments are being actively encouraged and supported is only good news.
5.The GCC is positioning itself to be a global tech hub
The GCC is a hugely tech-hungry region, with domestic demand for the likes of social media, cloud and other data-first applications skyrocketing. The region is also looking to take the lead on technological innovations such as smart cities, AI, crypto and blockchain.
Per McKinsey for instance, AI has the potential to deliver huge value to the GCC – up to US$150 billion. McKinsey also found that 62% of its survey respondents said AI is already being used in at least one business function, and that there is a huge amount of untapped AI value in the GCC. As for smart cities, KSA is leading the charge with the PIF-backed NEOM and its ambitious The Line, while Dubai is steadily excelling as one of the world’s leading crypto hubs.
There is, then, a huge amount of growth and demand for data centre requirements as the region looks to become a global tech hub.
Investing in the future
The GCC region has seen huge changes in the data centre industry in recent years – and there’s a lot more change to come. The region is on a strong growth trajectory as it opens up internationally and looks to diversify and invest in the future – for the data centre industry, this promises an exciting and profitable road ahead.
Want more insights on the GCC data centre market? Join us at Touchdown Middle East 2023, 21st-22nd November in the Kingdom of Bahrain for the GCC’s first region-wide data centre conference.
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