The data center market in the Middle East is located at the intersection of Asia, Europe, and Africa and has grown significantly over the past few years. The largest markets in the region are the UAE, Saudi Arabia and Israel, followed by Qatar, Bahrain and Oman. The most attracting cities include Dubai, Abu Dhabi, Riyadh, Tel Aviv and Doha. The following are the introduction of these markets.
1.UAE
The UAE has the largest in-use capacity in the Middle East, with the market concentrated in Dubai and Abu Dhabi. The country has been supported by a building and expansion boom in the tourism economy and is currently the regional leader in the data center industry with 114MW of physical capacity.
The UAE's economic growth is reflected in its data center market - the country's power supply has grown by an average of 10MW per year since 2011, and now totals 222MW of capacity, a twofold increase over the past five years.
Gazing into futurity, EPI CHINA expects growth to be increasingly driven by wholesale data centers, which account for 78% of phased and under-construction capacity. Since December 2020, new legislation has allowed foreign entities to own 100% of operations in the UAE, although the impact of this on the data center market has yet to be fully realized.
1.Saudi Arabia
To be specific, Saudi Arabia currently accounts for 68% of phased construction projects in the Middle East. With a current in-service capacity of 67MW, this will translate into nearly 700% capacity growth over the next few years as new projects are implemented. The significant growth in total capacity is primarily driven by wholesale data center facilities to meet the country's ambitious targets and growing data demand in the region.
Riyadh's growth is particularly indicative of the overall shift in the market, which is expected to shift its composition from nearly 70% retail colocation at present to 88% wholesale colocation.
There are currently 22 active data centers in Saudi Arabia, primarily concentrated in Riyadh.
The data center market in Saudi Arabia currently consists of five companies, DETASAD (Detecon Al Saudia Co. Ltd.), Shabakah Net, NourNet, Tabreed, and Etihad Atheeb Telecom Company (GO), which are involved in the Information Technology (IT), Telecommunication Services (CS), Information Technology (IT) Service Provision (ITSP). Refrigeration Service Providers and other industries.
3. Israel
Israel's data center market is the third largest in the Middle East, with a total overall capacity of 130MW, mainly centered in Tel Aviv. Similar to the UAE, the country's in-use capacity has almost quadrupled since 2017.
In 2021, AWS and Google were awarded contracts to provide cloud services to Israeli government agencies, which will have a significant impact on the country's data center landscape, and is expected to bring at least 70MW of additional capacity to the market - the current actual capacity stands at 32MW. Despite the project's low in-use capacity, it currently accounts for the Tel Aviv 64% of the region's phased and under-construction power, with wholesale accounting for the remaining 34%.
In February 2023, Techtonic announced the company's plans to build a 16 MW underground data center in Bet Shemesh, Israel.
In April 2023, EdgeConneX constructed a third data center in the State of Israel, which will add 7.5 MW of IT capacity. The new data center will be located in Rishon and will complement the company's existing operations near Tel Aviv, including two sites in Herzliya in the north and Petah Tikva in the east of the city, bringing the total capacity to 14.5 MW.
Investment in the Israeli data center market is expected to reach $795 million by 2026, according to a report by Research and Markets. (datacenterdynamics.com)
4. Qatar
Doha is a vital data center market for Qatar - the city and its surrounding areas account for the vast majority of the country's supply. As the fourth largest market in the Middle East with a total capacity of 51MW, it is becoming a popular cloud data center in the Middle East. Total capacity is growing at a CAGR of 45% per year from 2011 to 2021, including 54% in 2021.
Qatar was initially dominated by state-owned companies in the data center market, although it has started to see more involvement from foreign companies. In 2021, total amount of supply grew by 54% and with 56% of projects phased or under construction, we can expect the market to continue to grow strongly.
In 2022, Microsoft announced the launch of a new data center region in Qatar, marking a major milestone for Microsoft in becoming the country's first hyperscale cloud provider to offer enterprise-class services.
5. Bahrain
Excluding public cloud operators, which account for more than 50% of the total capacity, Bahrain's data centers are currently comprised of a variety of small retail colocation providers and national telecom facilities.
With 20MW of in-service capacity, Bahrain remains a small market compared to its neighbors such as Saudi Arabia and the UAE, but is expected to become an increasingly attractive destination for data centers. Considering Bahrain's potential, when the UAE had similar capacity in 2013, its in-use supply grew by 150% over the next five years.
6. Oman
Oman is one of the fastest growing markets in the Middle East in terms of digital transformation initiatives and Internet of Things (IoT) adoption, with a 95% internet penetration rate. Cloud service providers such as Alibaba, IBM and Microsoft operate in Oman through local partners.
As of today, there are five data centers in Oman, with Muscat, the business and economic capital, being the main data center hub in Oman, with three existing third-party data centers contributing more than 50% of the available capacity. According to a study by Arizton Advisory and Intelligence on the Oman data center market, the market is expected to grow at a CAGR of 9.6% by 2028.
In addition, the government of Oman has three free trade zones, Al Mazunah Free Zone, Salalah Free Zone and Sohar Free Zone, and two special zones, Duqum Special Economic Zone and Muscat Knowledge Oasis (KOM). The tax incentives it offers have also benefited data center companies, with cloud providers including Oracle, AWS, Microsoft, and Google also deployed here.
Major Service Providers:
In the Middle East, the presence of smart cities in the region is also driving data center investment. For example, Saudi Arabia's NEOM project is being developed as part of Crown Prince Mohammed bin Salman's Vision 2030, which will also include data center development by the joint venture ZeroPoint DC.
Major global cloud service providers in the region include Amazon Web Services, Tencent, Microsoft, Google, Alibaba, Oracle and Huawei Technologies Co.
Cross-enterprise digitization will increase investment in data centers by hosting, cloud, internet and telecom providers. Ericsson, stc, Turk Telecom, Cellcom, Zain, Nokia, Vodafone, Ooredoo, du and Omantel are some of the telecom companies responsible for the deployment and introduction of 5G services in Middle Eastern countries.
Future:
Most of the facilities in the Middle East data center hosting market are under development and run at a PUE of less than 1.5. In contrast, few facilities in countries such as Turkey are designed to operate at a PUE of less than 1.3 by employing partial natural cooling during peak winter months.
The managed services Middle East data center hosting market is projected to increase in value from USD 1.39 billion in 20223 to USD 1.84 billion by 2028, growing at a CAGR of 6.83% from 2022-2028.
There is no doubt that Middle East data centers are experiencing significant growth!