Digital Infrastructure Insights: Exploring the Future of European Data Centres – Interview with Mark Pestridge

In this episode, Nicholas Collins and Mark Menzies are joined by Mark Pestridge, EVP and GM of Telehouse, to discuss the impact of AI on data centre growth, the importance of interconnection, and the challenges of scaling capacity in Europe. The conversation covers Telehouse’s approach to navigating power and planning constraints, community engagement, sustainability, and the essential role of partnerships in delivering innovative solutions for customers. Mark also shares his outlook for the London and European markets, and how Telehouse is preparing for the next wave of digital transformation.

[Nicholas Collins]

Well, hello and welcome to Digital Infrastructure Insights brought to you by Eight Advisory. I’m Nicholas Collins and in this series, we’re going to explore the trends, challenges and opportunities shaping the European digital infrastructure landscape. Joining me today is my colleague Mark Menzies, also from Eight Advisory. And together we’re delighted to welcome our special guest, Mark Pestridge, EVP and GM of Telehouse. Probably one of the better-known recognised brands in the digital infra ecosystem.

Today we’re going to be discussing also Eight Advisory’s latest report, the European Data Centres Powering Growth in the age of AI. This report looks at how the rapid growth of AI is shaping the continent’s digital infrastructure ecosystem. And what better way to get first hand insight into this topic as having one of the operators themselves talk with us. It gives me great honour to welcome Mark Pestridge to our conversation. Welcome Mark. Thanks for joining us.

[Mark Pestridge]

You’re very welcome, Nick. It’s good to be here today. Looking forward to the conversation.

[Nicholas Collins]

Excellent. Maybe Mark, just to get the ball rolling. You’re a well-known brand, but maybe there’s people going to be watching this who are a little less familiar with Telehouse or maybe known for what you were but maybe bring to life a little a bit about what Telehouse is today as a business.

[Mark Pestridge]

Telehouse is part of a KDDI Corporation, so Japanese, fully owned by the Japanese company. We’ve been around since 1989 so that I guess for 36, 37 years now and really, our DNA is around interconnection, I guess in, in days gone by, we have been called a carrier hotel. Really, now we’re all about interconnection. So how we enable the cloud providers, service providers, ISP’s, ASP’s, CDN’s, all to benefit from them being in the same location and exchange information in traffic and then provide those services on to enterprise and other. In 40 different countries across the world through North America, Europe and Asia. And in the UK alone, we have five Data Centres, soon to be six, which is, an exciting, advancement for us and all part of the growth of digital infrastructure in, in not just London, but the UK.

[Mark Menzies]

So, AI is increasingly dependent on proximity to data, cloud platforms, networks and end users, which means an interconnection hub or carrier hotel like Telehouse becomes a really strategic control point. What role in that respect do you see Telehouse playing in the emerging AI ecosystem?

[Mark Pestridge]

Yeah, thanks, Mark. I think we see it’s a really exciting opportunity for us, as you say, as we’ve evolved from Carrier Hotel to interconnection, and now we see that we’ve got a huge role to play in primarily the AI inference world. I think, as a carrier hotel in the city centre location, I don’t think there’s a role for us in the large language models or AI training. But as the world moves towards AI inference, where I guess interconnection means low latency, doesn’t it? I think we have a huge, huge role to play so we can provide that low latency connectivity, within the fabric of our campus and our Data Centres across London, Paris, etc.

But I also think from a data sovereignty perspective, Telehouse plays a really important part. It’s really important from a data sovereignty perspective and from a security perspective that, when necessary, customers can understand and know that they have that data in the right place. So, we’re using us to leverage the flexibility and agility of perhaps the public cloud but also making sure they’ve got their private applications in the right place. So, I think there’s a huge opportunity for us. I think we are beginning to see some of that activity and that opportunity come through. Mark. And I think I will really see that growing and augmenting over the next kind of 12 to 18 months as well as we move forward at a pace in the AI world is moving so fast, isn’t it? I mean, the changes over the last 18 to 24 months have been incredible. I see that going even faster in the next 12 to 18 months.

[Mark Menzies]

So, in our report, we noted how Europe has this ambition to triple existing Data Centre capacity by 2032. But we’ve also highlighted a number of major hurdles that we think could well frustrate that ambition. Everything from power availability and grid congestion to long planning and permitting cycles.

What’s your perspective and how is Telehouse navigating these constraints to new greenfield sites? And what, in your view, do you think needs to happen across both industry and government to ensure both the UK and Europe can sort of meet the scale of digital Infra and AI investment needed?

[Mark Pestridge]

That’s a very real challenge that we face, not just in the UK, but as you say, across Europe as well. There’s a real need for speed to market because the AI opportunity is it’s not necessarily just a specific city-based or a company-based opportunity. It’s definitely a country or European opportunity. So, I think there are challenges that we face today around speed to get access to power. And for me, I think that access to that power is that is the most important thing. I think one of the things that we’re doing, not just at Telehouse, but as a wider kind of DC operator forum in the UK, is working closely together, understanding we all share the same challenges and then looking to work hard with government bodies or the government itself, to really impress upon the fact that if the UK wants to be a leader in AI infrastructure and really play in this market, we need to be able to remove some of the red tape and some of the barriers to enable us to deploy quickly. And I’ve been pretty encouraged in the last year or so in the way that we’ve been able to interact with the Department for Science, Innovation and Technology, but also leverage organisations like techUK who can really stand there as a as a spokes-forum, for the for the DC industry.

And again, if we all work together as a DT operator forum, we can help drive that because there’s enough opportunity for all of us to be successful, but we have to come with one united voice. There is definitely momentum that there’s more we need to do, but we must remove those barriers. We must be able to deploy quickly if we’re going to win the race here in the UK and Europe.

[Mark Menzies]

Very useful. I just want to get your take on another topic we sort of covered in the report where the market dynamics in both FLAP-D and secondary markets in Europe. So, obviously in terms of the new aggregate volume of supply in megawatts, FLAP-D markets like London, are still seeing the most supply. But then when you look at the growth in percentage terms, it’s about 14% CAGR versus 23% in the secondary markets in part driven by, the power grid and planning constraints in FLAP-D. If you look at FLAP-D the vacancy rate, are still tightening a lot right up to 5-8%.

So, there is a lot of demand in supply constrained environment, and I was keen to get your view on how Telehouse view the current landscape in London. Just given these dynamics, and what’s your outlook for the market over the next few years?

[Mark Pestridge]

Yeah, I think again, connecting to the kind of point I made earlier, that the AI inference proximity to population, proximity to city centres, ability to interconnect is going to be key. The FLAP-D markets will come to their fore again I think again, connecting that to the point about removing some of the barriers, enabling those quick and agile connections to the grid, removing some of the red tape around planning permissions will really help. But I think for us to be successful, we have to be in those interconnected city centre locations. So, I think that will continue.

And I’m actually it’s been a really interesting week this week alone, hasn’t it? We’ve seen announcements about a 250-megawatt campus in South Mimms, which I guess you’d be class as London there’s 100MW in an old jam factory in Southall. And then announcement by Arc as well, so that there is definite appetite and there’s definite opportunity for London to continue to grow in spite of some of those challenges and the low vacancy rate. So, I guess the low vacancy rates really show you how important a hub London and the other FLAP-D markets are.

[Nicholas Collins]

Yeah, It’s interesting. I just feel like every week there are just more and more announcements, across the digital infrastructure ecosystem where there are these major, major developments. It just doesn’t seem to be a week when there isn’t any news. It’s always hard to keep up, which is why I think, you know, this is such a dynamic industry at the moment.

And maybe just a quick follow on, Mark, one of the things you mentioned in your answers there was around UK versus Europe, do you think it’s a competition between UK and Europe when it comes to building out the AI ecosystem, or do you think it’s going to be more of a complementary? And I think this ties into maybe some of the themes that we’ve touched on recently at the Capacity Europe event in London.

[Mark Pestridge]

That’s a great question. I think it’s a bit of both. If that’s not sitting on the fence too much.

[Nicholas Collins]

You’re the guest you can sit on the fence.

[Mark Pestridge]

Yeah, the UK government has announced it’s kind of its intention to be an AI growth zone, hasn’t it? And really wants to be at the forefront of that. But at the same time, we can leverage expertise, knowledge and across the continent as well. So, I think there is a way for us to be complementary as well as really focusing on what we’re trying to do here in the UK.

[Nicholas Collins]

And look I think it’s fair to say that probably during the pandemic the attention was very much on the critical component of fibre to everybody’s lives. So, there was a lot of awareness created around the role that the fibre plays in the digital infra ecosystem. And you probably argue now that AI has really done the same for Data Centres people’s awareness of Data Centres is vastly lifted just by the conversation around AI. And that’s from a general public perspective and clearly, there is a growing community discussion and debate around the role of Data Centres, particularly in dense urban markets and you arguably operate in some of those and those concerns around land use, power, having big buildings in their backyards, potential environmental impacts even.

How does this sort of resonate within Telehouse, and what is the approach you’re taking around community engagement? How are you sort of navigating it so we can try and shift the conversation for Data Centres being seen as a positive contributor to communities and not to the contrary?

[Mark Pestridge]

I think there’s a lot in there because that is a great question. We’re in the London Borough of Tower Hamlets, which is a built-up location. It’s also one of the most challenged from a wealth perspective as well. So, we’re very aware of the area in which we operate. We did a survey last year and we were astounded by the fact that how many people didn’t understand what a Data Centre did, so how many times they interacted with the Data Centre during the course of their day, whether that’s doing their online banking, booking appointments, streaming in the evening, whatever it might be.

So, I think we as an industry have a job to do in terms of educating the wider population on the good that and the quality of life that the Data Centres enable. But I think specifically about, I guess, about Telehouse in London Borough of Tower Hamlets. We are we as I say, we’re very aware of the world in which we operate. When we took over our last building, which was the former Thomson Reuters building on that on the Thames we made a very deliberate decision that we were going to refurbish that building rather than knock it down and start again. And one of the reasons that we did that is we understood the impact that it would have on the local community by knocking it down and starting again, as well as all the waste in terms of ESG and all those kind of things. So we’re very aware, we did that. It was a very challenging project and probably ended up costing us a lot more money in the process, but I think it was the right thing to do from an environmental perspective and a community’s perspective.

And the other thing they do is get again, back to LBTH we are fully engaged with two local charities, First Love Foundation and Leaders in the Community, who do amazing work in the borough. We’ve done a few things with these guys and continue to do a few things well. The first thing is when we did refurbish our Telehouse south building, the money we got from re-galvanising and repurposing the copper we gave to those charities. So we gave them each £15,000 from that regeneration project. And we also hosted a charity gala last year with all our partners and suppliers from across the industry, where again, we brought those people together and we raised £40,000 for those two charities, and we had speakers from both of those charities who were kind of overwhelmed by the work that we did.

I think there’s a huge amount we’re beginning to do in the community and the other pieces around making sure that we are educating people in these startup environments about what the opportunities are within our DC. So, we do two days a year where we bring people from these charities and from colleges to come and look around our DC’s, understanding what we’re doing, why we’re doing it, how important we are to the digital economy, but also what opportunities there are from a career perspective as well. And that’s been a really interesting and fun thing to do as well. I’m putting something back into the community for free if you like. And I think we have to do that if we are to create a better positive image of the Data Centre world, because a lot of people see is what they see on the TV about, massive electricity usage. There’s sometimes PR about water usage and we need to do a better job on educating the world about the good we provide as we move forward.

[Nicholas Collins]

Yeah. Congratulations on some of the work you do. I think you’ve hit on a couple of hot topics for the industry there as well. Talent being another one which will probably be part of a conversation we end up having, because as much as you see all the investment that’s happening in this space we can’t take our eyes off the talent topic as well.

You also mentioned partnerships a few times in your conversation, Mark. I just want to sort of double click into that if we can a little bit as well. You know, it’s not lost on any of us who work in this environment that it’s all about partnerships. You know, what is the role that Telehouse sees in partnerships. Is that something that you’re going to think is going to be accelerating as part of your future plans? Maybe you can just explain that a little bit more for us.

[Mark Pestridge]

Yeah, I think partnerships are essential for Telehouse, but not just important. I think they’re essential. At every level of which we operate, I think partnerships are key. From the initial construction phase of building a Data Centre. We engage with construction partners and then we’ll work with a different MNE partner. So those are absolutely fundamental to making sure that we can put together the building and the services and the solutions we need to then provide to our client. And then once we move into the operational phase, we have three key partners, really to help us from, what we call a facilities management perspective. So that is a partnership we have with a company called CBRE. Our security is all through a third party, and then our cleaning services, which are absolutely fundamental to keeping our environment clean, tidy and secure. And then from a go to market perspective, I think having partnerships with channel partners as well as, we’re working with some of the real estate agents. They absolutely help us go to market. We have a very small sales team for the actual size of company we are. So those partnerships are key.

And then the last piece of the jigsaw is really understanding what’s going to happen and evolve within our marketplace. So, working with research organisations, to understand how the market is evolving, what we’re seeing, what our competitors are doing, what’s happening in different parts of the world are fundamental. And I think that’s the key. How we manage those relationships at every stage is fundamental to our success. And we’ll continue to grow as we as we grow as an organisation too.

[Mark Menzies]

A last one just to close us off, is in a few words, what should customers and the London market expect from Telehouse in the next couple of years?

[Mark Pestridge]

In a few words, Mark. Yeah. I’ll say three things. More capacity. So we’ll have more capacity coming online in 2026, which is another 5.5MW more, different solutions to deal with the different types of requirements for the AI world. So, as we move from air cooled to liquid cooled to and a hybrid air and liquid cooled world, you have more agile, more flexible solutions to underpin those demands. And then lastly, very much a focus on customer centricity. So really understanding why customers would want to deploy with Telehouse or any of any other Data Centre on the understanding that nobody really buys Data Centre space because they want to. It’s because it underpins something that’s fundamental to their business. But those are the three things. I think in a few words I think I could go on forever about that. As you can imagine.

[Nicholas Collins]

You did well. You did very well. Look, I think there’s a couple of things you mentioned that it is like that word puzzle, right? It is like sometimes playing out, bringing a puzzle together, working across this ecosystem.

Hey, Mark, look, we’re on time. I just want to say thank you for joining us today and sharing your insights and sharing a little bit more about what’s happening in Telehouse. It’s always good to listen to what the operators are really doing. So, thank you for being open with us around that. And thank you to Mark as well. The other Mark, for joining us from Eight Advisory.

And of course, if you’d like to learn more about the report that we’ve been talking about, it’s available on Eight Advisory’s website. And we’ve got more conversations coming, in this digital infrastructure series as well. So, stay tuned for the conversations, that will be happening over the coming weeks. Until then, see you next time. Bye bye.