MARKET OVERVIEW

The Middle East and North Africa data center market was valued at USD 5.04 billion in 2022 and is expected to reach USD 8.38 billion by 2028, growing at a CAGR of 8.84%. The market is poised for continued growth in the coming years due to increasing internet penetration, the widespread use of social media, and various innovative initiatives. Data center investments are being made by telecommunication providers, enterprises, government agencies, cloud service providers, and colocation service providers, with a strong focus on expanding infrastructure. Furthermore, numerous countries in the Middle East and North Africa are witnessing a surge in both inland and submarine network connectivity installations, thereby supporting market growth.

KEY HIGHLIGHTS

• In the Middle East and North Africa data center market, the United Arab Emirates (UAE) and Saudi Arabia play significant roles, contributing around 30% and 27% to the regional capacity, respectively. It is expected that the market in these countries will experience growth over the next four to five years due to a shift from an oil-based economy to a more digital one. Additionally, Egypt is a key player in North Africa, followed closely by Morocco. Factors such as the adoption of cloud-based services, the development of smart cities, and the expansion of fiber connectivity are driving continuous investments in data centers across the region.
• Major global cloud service providers, including Amazon Web Services, Tencent, Microsoft, Google, Alibaba, Oracle, and Huawei Technologies, have a presence in the Middle East and North Africa (MENA) data center market. For instance, Microsoft has expressed its intention to establish a cloud region in Saudi Arabia.
• The presence of industrial parks, available land, and government support serve as incentives for operators to develop data centers in various Middle Eastern and African countries. For instance, the Bahrain government has announced the launch of its first data center park, with stc Bahrain collaborating with the Ministry of Transport and Telecommunications to develop the first data center within the park.
• The Middle East and North Africa data center market is experiencing continuous growth in connectivity, with the deployment of new submarine cables such as Africa-1, 2Africa, India Europe Xpress (IEX), Raman, Saudi Vision, Blue, Equiano, Medusa Submarine Cable System, and SeaMeWe – 6. These cables are expected to become operational during the forecast period, enhancing regional connectivity.
• The introduction of 5G technology in the MENA region is expected to generate a substantial amount of data, leading to increased investments in data centers. 5G technology offers features like high internet connectivity, greater bandwidth, and reduced processing time. Countries such as the UAE, Saudi Arabia, Oman, Kuwait, Bahrain, and Qatar have already deployed commercial 5G networks, while North African countries like Morocco are in the planning and testing phase, with commercial services expected in the future.
• The adoption of Artificial Intelligence (AI) across various industries is also driving investments in data centers in the region. For instance, in August 2022, Huawei and ITDIA in Egypt formed a memorandum of understanding (MoU) to promote AI-based startup investments through the "Spark" initiative. In Kuwait, two policies, Vision 2035 and New Kuwait 2035 are part of an AI initiative aimed at utilizing AI and related technologies to create future job opportunities.

MARKET TRENDS & OPPURTUITNIES

Procurement of Renewable Energy
The Middle East and North Africa (MENA) data center market is experiencing a significant surge in the adoption of renewable energy sources. Numerous countries in this area have initiated renewable energy projects as part of their respective governments' efforts to achieve carbon-neutral goals. For example, the United Arab Emirates (UAE) has set ambitious targets in its Energy Strategy 2050, intending to increase the proportion of renewable energy in its total energy mix from 25% to 50% by 2050.

Similarly, Saudi Arabia has launched the National Renewable Energy Program (NREP) under Vision 2030, encompassing 13 projects that are anticipated to generate over 4.8 gigawatts (GW) of renewable energy. Additionally, Bahrain has outlined plans to produce approximately 280 megawatts (MW) of electricity from renewable sources by 2025, to reach around 700 MW by 2030 to meet national renewable energy targets. Furthermore, Saudi Arabia's 2030 Vision includes the development of ten renewable energy projects with a combined capacity of 7 GW, marking a significant step in the kingdom's renewable energy journey.

Quantum Switch Tamasuk (QST) has forged a partnership with the Ministry of Communications and Information Technology (MCIT) in Saudi Arabia. This collaboration not only involves the development of data center facilities but also focuses on sourcing and advancing renewable energy solutions to power their operations. Further, in the Middle East and North Africa (MENA) data center market, there is a growing commitment to sustainable practices. Companies such as Equinix, Moro Hub, and Khazna Data Centers are actively investing in renewable energy solutions, including the installation of solar panels, to harness the benefits of solar energy. Notably, Moro Hub's data center, situated within the DEWA solar farm, has become one of the world's largest solar-powered data centers, showcasing the region's dedication to sustainable practices.

Rising Adoption of Artificial Intelligence
The Middle East and North Africa data center market is currently experiencing significant growth due to the increased adoption of advanced technologies like AI and ML. These technologies are becoming more prevalent in data centers, where they are being used to manage the power grid and electricity distribution more effectively. AI plays a crucial role in helping operators determine the optimal times to generate, store, and use energy, offering the added advantage of remote power generation and distribution control.

• In the Middle East and North Africa data center market, countries such as the UAE, Saudi Arabia, Egypt, and Morocco stand out as major players in AI adoption. For instance, the UAE government has developed a comprehensive strategy for AI integration as part of the Centennial 2071 project. This initiative focuses on applying AI-based technologies across various sectors, including healthcare, education, and aviation.
• In Saudi Arabia, AI is expected to contribute significantly to the country's economy, with an estimated impact of over USD 130 billion, equivalent to 12% of the GDP. Similarly, the UAE anticipates AI to make a substantial contribution of more than USD 95 billion to its economy by 2030, representing a 13.6% share of the GDP.
• Bahrain is also actively investing in AI development through its Digital Strategy 2022, which aims to foster the growth of AI and its applications. As part of this strategy, Bahrain has established the AI Academy to further promote AI education and research within the country.

SEGMENTATION INSIGHTS

• In the field of data center development, there is a widespread focus on achieving a Power Usage Effectiveness (PUE) rating of less than 1.5 for most facilities. However, in countries like Turkey, where partial free cooling is adopted during peak winter months, the aim is to achieve an even more efficient PUE of less than 1.3.
• The Middle East and North Africa data center market is making substantial investments in the power infrastructure, ensuring a minimum of N+1 redundancy. In the year 2022, Uninterruptible Power Supply (UPS) systems held a significant market share, accounting for over 30% of the total electrical infrastructure in data centers.
• Given the high-temperature climate in some countries within the Middle East and North Africa region, there is a notable emphasis on investing in cooling infrastructure. In 2022, more than 65% of the total mechanical infrastructure investment was directed toward cooling systems by service providers.
• The Middle East and North Africa data center market has witnessed a notable trend in deploying data centers with Tier III and Tier IV certifications during the design and construction phases. Many private and public entities, including those in the banking, financial services, and insurance (BFSI) sector, education, and government, have sought and received Uptime Institute's Tier III/IV certification either during the design phase or after the facility's construction.

GEOGRAPHICAL ANALYSIS

• The UAE dominates the Middle East and North Africa data center market in terms of data center developments. In addition, Saudi Arabia, Israel, Egypt, and Oman are among the major contributors, with high data center development activities in the Middle East and North Africa data center market. Qatar, Egypt, Morocco, and Kuwait are emerging markets that witness significant growth as a result of digitalization and growth in connectivity.
• In the Middle East and North Africa data center market, the presence of smart cities in the region also drives investments. The UAE, Saudi Arabia, Kuwait, Morocco, and Egypt are some of the major countries in the region that triggered the smart city investments. For instance, the NEOM project in Saudi Arabia is under development as a part of Crown Prince Mohammed bin Salman’s Vision 2030, which will also comprise the data center development under a joint venture firm ZeroPoint DC.
• Easy availability of land and the Special Economic Zones drive the development of data centers in the region. Such as Oman has free trade zones such as the Al Mazunah Free Zone, Salalah Free Zone, Sohar Free Zone, and Duqm SEZ, which provide multiple benefits to investors, including corporate tax exemption, total exemption of import and export taxes, and local labor recruitment.
• In terms of upcoming power capacity (IT load), Saudi Arabia is dominating the Middle East and North Africa data center market with an excess of 500 MW of under-construction/announced/planned capacity. The UAE follows Saudi Arabia with an excess of over 200 MW and South Africa with more than 150 MW of under-construction/planned capacity.

VENDOR LANDSCAPE

The Middle East and North Africa data center market is poised to offer significant revenue opportunities for construction contractors due to the burgeoning data center activities. Key players in this sector include AECOM, Laing O’Rourke, Dar Group, Mercury Engineering, Deerns, Anel Group, Linesight, M+W, McLaren Construction, Atkins, B2 Architects, ENMAR Engineering, Arup, DC Pro Engineering, Edarat, Sterling and Wilson, United Egypt, Westwood Management, HHM Building Contracting, Red Engineering, and Turner & Townsend. For example, Laing O’Rourke has been selected by Khazna Data Centers to oversee the construction of a data center and office space in the Dubai Design District.

Additionally, colocation service providers like Khazna Data Centers, Gulf Data Hub, MEEZA, Moro Hub, Africa Data Centres, Raxio Data Centres, IXAfrica, Rack Centre, and Wingu play a pivotal role in the Middle East and North Africa data center market. The Middle East is on the brink of substantial growth, with Khazna Data Centers and Gulf Data Hub spearheading the development of over 15 facilities in the UAE, Saudi Arabia, Oman, Kuwait, Qatar, and Bahrain, slated to become operational in the forecast period. Furthermore, the escalating demand from various industries has prompted operators to engage in numerous M&A agreements and joint ventures (JVs) to expand their service offerings, attract clientele, and secure a larger Middle East and North Africa data center market share.