A prominent trading hub, a pioneer in regulatory and legal reforms, and a gem amongst the GCC States. In tandem with Bahrain’s 50th national day celebrations, we are excited to introduce the latest edition of Law Update, where we explore the significant development that the Kingdom of Bahrain has achieved as a nation on the regional and international stage.
In this standout Bahrain Focus, our lawyers provide insights and expert commentary on pertinent legal updates within the country. From an interview with an industry leader discussing the Bahrain real estate market to an insightful overview around alternative working arrangements and its economic effect. In addition, you will find several general articles along with real-life judgments that provide context for the legal landscape across the entire region.Take a read of the edition
Data centres are the backbone of the internet and are increasingly important as the growth in internet usage accelerates. The digital transformation of businesses and their move to the cloud, the growth of online content and the arrival of 5G have all been key factors in the recent growth of internet usage. Businesses and individuals are spending more and more time online. This was before the COVID-19 pandemic greatly accelerated these trends. To support this, we are seeing an unprecedented global data centre building spree.
The hyperscalers (the likes of Facebook, Google, Amazon, Microsoft and Alibaba) have been a big part of this change. Traditionally, these hyperscalers would have been building large hub data centres in key European, US or Asian locations with internet traffic being routed to these facilities. This has now changed. Hyperscalers are looking to build closer to their markets, and to position their data centres strategically in new emerging markets. Each has a different strategy, whether building data centres to cover regional markets or identifying key individual markets and locating data centres there. This is often driven by legal and regulatory requirements, as well as commercial considerations, in the Middle East.
The growth in these hyperscaler data centre builds is not to be confused with the rise of edge data centres. As we have written about previously [ attach link to edge computing article ], this is a new approach, creating micro data centres, close to users, to provide greater (and faster) internet access to support high bandwidth requirements for technologies such as 5G and connected cars.
The hyperscalers are not the only players in the new data centre space. The hyperscaler need for data centre capacity has spawned a new wave of data centre builders – specialist data centre companies that build for the exacting specifications (and timelines) of the hyperscaler market and, more generally, for cloud and managed service providers and major corporates. These data centre builders will often be the first entrants into a new market, and particularly into key emerging markets. Funded often by infrastructure investment funds that have identified the investment opportunities in the data centre space, or property development companies seeking to move into a new and lucrative market, these data centre builders are both acquisitive, buying data centre footprint in markets key to their customer base, and also ready to undertake new builds, depending on the market.
In the first of a series of short articles looking at key aspects of data centre development in the Middle East, we focus on key data centre real estate and construction issues. It is important to note that advising on data centre builds requires a mix of legal skills and industry expertise covering the different, and often conflicting, requirements of data centre developers, operators, funders and end user customers.
The leasing of data centre space can take different forms such as:
Nevertheless, whatever the type of leasing, there are some common key considerations for end user customers who are collocating their equipment in a data centre. These include:
The co-location (or similar) agreements signed between Data Centre Operators and end-user customers are critical for protecting customer legal rights and commercial interests. These are increasingly moving to managed service or cloud based services agreements. These come with additional issues that need close legal and commercial attention.
There are a number of important considerations that need to be factored into the procurement strategy, in order to ensure that the design and construction of datacentres, in addition to the management of such facilities post-completion, are as trouble-free as possible. This is particularly important based on the challenging timelines required by the hyperscalers for data centre builds.
We set out below some of the key considerations to note from the perspective of a data centre developer and how thee developer (and their stakeholders) may try and mitigate against the risk of issues arising on such projects:
In subsequent articles in this series, we will look at other key data centre issues including: regulatory issues, energy and environmental issues, data centre tax issues and data centre financing.