Brazilian Data Center Report - Cushman & Wakefield

Cushman & Wakefield Report Takes a Deeper Look at the Brazilian Data Center Market

As Brazil prepares to host the FIFA World Cup next month and the 2016 Summer Olympic Games in Rio de Janeiro, Cushman & Wakefield’s Global Data Center Advisory Group has released a market report examining how these catalysts are impacting the data center growth in this emerging market.

Market.Bytes, Regional Focus: Brazil provides a first-hand account of navigating the ever-changing landscape of South America’s largest economy and a comprehensive overview of its data center market.

“Brazil is an emerging market in transition with a forward looking population who are early adopters of new technology and companies that are willing to innovate,” said Jeff West, Director of Data Center Research for Cushman & Wakefield. “At the same time it is a country with one foot tied by unreliable infrastructure, government red tape and a shortage of skilled labor.”

Brazil underwent a typical business down cycle bottoming out in 2012, but public and private infrastructure investments have pushed the economic recovery. Currently the country garners the fourth largest level of Foreign Direct Investment in the world behind only the U.S., China and Hong Kong, according to the report.

As the fifth-largest country in the world with a population of 200 million, Brazil ranks as the seventh largest economy. The 99.3 million internet users and 271 million mobile phones are just the beginning of the demand for an infrastructure upgrade in the country.

“Despite the challenges, and spurred by two globally-watched sporting events, new data infrastructure is coming online and it is creating a wealth of new opportunities,” said West. “With less than 500,000 sq ft of operational data center space in the entire country, opportunities are readily available if new entrants to the market have the patience and resources to build capacity.”

Many American companies – including Dell, Hewlett Packard and Amazon – have successfully opened a data center or established a presence in the country, according to the report. Brazil has the most mature fiber infrastructure and best connectivity in Latin America to the United States.

Like any emerging market Brazil presents unique challenges for international companies looking to enter the market, but the country stacks up favorably to other BRIC nations. Market challenges include taxes, power infrastructure, and reliability. The abundance of hydro means a low cost of generation. However, it is subject to price fluctuation and supply shortage in the drought years.
 
MULTI-TENANT DATA CENTER MARKET

Currently, there is less than 500,000 SF of operational data center space in Brazil and only three U.S.-based data center providers in the country: Equinix (who acquired local provider ALOG), Level 3 Communications (via its acquisition of Global Crossing) and Verizon (via Terremark), according to the report.

Key submarkets include São Paulo and Rio de Janeiro. São Paulo represents the largest data center market in South America, accounting for 50 percent of capacity in Brazil – approximately 450,000 operational square feet. Financial institutions, multi-national firms, and e-commerce companies drive the demand here. Barueri, located near the stock exchange, is also emerging as the new data center centric area.

The Campinas, Jundiai, and Hortolondia region – located approximately 30+ miles outside of São Paulo – is known as the “Brazilian Silicon Valley.” The first wholesale data center options in the country are being offered in Campinas, with capacity following in the areas of Jundiai and Hortolandia.

In late 2012 carrier-neutral provider Ascenty opened its first data center in Campinas, in Brazil’s southeast region, and is the first multi-tenant operator to provide wholesale service as well as retail colocation, hosting, cloud, and managed services in Brazil.

Ascenty’s entry into Brazil is a key market event. The company built and owns a 2,000 km fiber network. Its ability to deliver cheaper connectivity and dark fiber has created the opportunity to provide less expensive and higher quality data centers further from the City of São Paulo. Ascenty also provides retail/colocation, managed services, and cloud offerings along with its own fiber optic network that connects several cities and key data centers in the São Paulo region. The provider has full build out capacity of more than 30 MW in three locations.

“The business environment has changed dramatically since I first moved to Brazil in 1988, but the challenges of a highly bureaucratic government still exist. Brazil is now a country that can’t be ignored…there are too many people who want the latest technology and technological solutions for both personal and professional use. It is a massive market coming into its own and we see demand coming from both multinational and Brazilian companies,” said Chris Torto, Ascenty CEO. 

Click here to view Cushman & Wakefield Data Center Advisory Group’s full report, Market.Bytes, Regional Focus: Brazil.

Cushman & Wakefield’s Data Center Advisory Group is a global team of elite professionals who specialize in the delivery of precise real estate solutions for data center users and owners. The team is geographically diverse, covering relevant markets throughout North America and partnering with technical property specialists in Europe, Asia, and South America. The Group is also multi-disciplinary, including brokerage professionals, business consultants, project and facility managers, and appraisers. The group’s twitter account is @CushWakeDATACTR.

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