Data centres are continuously referred to as the heartbeat of the world, connecting all these facilities and connecting us. We have certainly seen data centres become a significantly growing asset class. It is now considered a tier one asset class in terms of jobs. Last year it created over 45,000 jobs in the UK alone and generated over 4 billion in revenue for the UK. All these markets have seen huge growth in data centre demand. Data centres are often perceived as an energy hungry asset class but it is here to stay.
It is not just a trend but a growing and emerging market.
You mentioned that salaries are still on the way up within the data centre space. It does pay a premium. Welcome to Microscope, your lens into real estate hiring and careers, brought to you by Macdonald and Company. In this episode we are diving into data centre recruitment. By way of introduction, I am Luke Mariosa, head of data centres for the UK and Europe, and I am Alex Moore. I run the real estate services team which is slightly broader than just data centres, hiring into multiple other asset classes with a geographic focus predominantly within the M25 and the home counties. We hire into multiple disciplines all focused within real estate.
Today we are talking about data centres. For anyone unfamiliar, to keep it simple, a data centre is the physical infrastructure for housing network equipment for businesses wanting to process and secure their data. It was recently announced as part of the critical national infrastructure, which has had a huge impact on the market. This was announced by the technical secretary Peter Kyle in September last year, meaning it is considered just as important as energy, water and defence in the UK. This has had a major impact as the market continues to grow.
As a team, we have certainly seen data centres become a significantly growing asset class over the past six to 12 months. We saw similar trends coming out of 2020 with increased demand across the industrial sector and life sciences, and we are now seeing the same within data centres. A question we often ask is whether this is simply a short term trend over the next three to six months, or whether it will go far beyond that. The answer is that it is here to stay. With digitalisation, the growth of tech and the rise of AI, data centres are a necessity.
Data centres are often described as the heartbeat of the world. The veins and arteries are the fibre subsea cables connecting these sites and connecting us. Even something as simple as using our phones relies on them. Digitalisation is one factor but the amount of capital entering the market is another. It has now become a tier one asset class, whereas before it was considered more of an alternative asset class. The number of new market entrants has grown exponentially, with new investment, new capital and joint ventures becoming far more common.
A useful statistic is that last year the sector created over 45,000 jobs in the UK and over 4 billion in revenue. It is definitely here to stay. Beyond the UK, our data centre focus extends across Europe and Asia. From a human capital perspective, the UK remains the main hub for most businesses in EMEA, but other major markets are also seeing growth. The traditional tier one markets, often referred to as the FLAP markets, include Frankfurt, London, Amsterdam and Paris. All have seen huge demand and growth. Around 75 percent of hiring managers in data centres say they plan to hire in the next 12 months, which is incredibly positive.
We know there is a shortfall in candidate supply. Clients often ask what they can do to attract the right talent. One factor is widening the talent pool. Many mission critical sectors use similar equipment, such as aviation, pharmaceuticals and oil and gas. These are viable sectors to draw transferable skills from. Beyond that, there needs to be more work at the foundation level. This includes running more early career campaigns, integrating data centre modules into university real estate degrees and creating vocational routes. The National Data Centre Academy is already helping with this.
We are also seeing more internships and graduate schemes within the sector. Major consultancies have long offered two year programmes with six month rotations, including time on a data centre desk. We need to see more of this from developers and operators, and we are starting to see progress.
In other real estate asset classes, we traditionally see around eight out of ten candidates move from consultancy to client side after a period of time. This trend also exists in the data centre market. Both CBRE and Cushman and Wakefield run apprenticeship programmes to help develop talent and encourage people into the industry, which has been beneficial. There will always be a desire to move client side and this is where Macdonald and Company works well, given our broader real estate expertise. Bringing valuers, capital markets professionals and others across from consultancy into client side roles remains a strong route into data centres.
It is interesting to see how asset classes evolve and the way specialists transition. We have seen traditional residential specialists move into build-to-rent and PRS, and office agents move into co working. There are certainly parallels. Other challenges our clients face include the size of the talent pool. If clients only want data centre experience, the pool remains small. We encourage clients to consider sector adjacent experience and transferable skills. A team with blended experience can often outperform a team made up solely of people from the same background. Geographic factors also play a role. Visa sponsorship can be a challenge but it also helps widen the pool when clients are open to it.
Salaries, supply and demand are another major topic. Across the wider real estate space salaries have stagnated over the past 12 months, but in data centres salaries remain on the rise due to the limited supply of candidates. It is one of the big attractions for people entering the sector. It does come with pressure but the rewards are significant. Over the past year the premium has grown. Hiring across countries varies. Some clients prefer domestic hiring to avoid visa concerns but it often depends on the role and language requirements. Domestic hiring is always easier, but if clients also want data centre experience and want to offer a low salary, it becomes challenging. We guide clients on prioritising what truly matters.
ESG is another growing priority. With increasing regulation, particularly in the UK, more clients now mention sustainability as a requirement in job descriptions. One example is a client whose backer set up a fund dedicated to investing in companies where sustainability is central. This required the client to hire a head of ESG, which they had not needed previously. Data centres are often seen as energy intensive, which they are, but they are also at the forefront of technology using advanced systems to reduce water usage and regenerate heat for communities. ESG is a major topic within the sector globally. Regulations differ between the UK and the US, making operations here more challenging and increasing the need for candidates with these skills.
To summarise some of the key points, the data centre sector is growing rapidly. It is important that clients remain open minded to a wider pool of candidates and that awareness of the asset class increases. More marketing, more education and earlier engagement through university and vocational routes will help. It is not a niche asset class but a vital and expanding one. Markets across Europe, including newer markets such as Portugal, are growing quickly.
We often receive interest from candidates within industrial and logistics. Clients still have prerequisite lists and often require direct data centre experience. It is our role to guide clients and advise where transferable skills can be valuable, even if candidates do not tick every box.
If you would like to explore how we can support your talent needs or find further guidance, check the episode description to connect with a consultant, visit macdonaldandcompany.com/contact and subscribe to Macdonald and Co on YouTube for more episodes of Microscope. You can also find us on Spotify and Apple Podcasts.
