How Building Data Centers Will Boost the European Real Estate Market

The Growing Business of Big Data Storage

The big data industry is booming, and so is the business of storing it.
Warehouse owners were already capitalizing on the space demand created by cloud computing, but the surge in artificial intelligence has taken this trend to new heights.

The rise in data center construction is driving a leasing frenzy across Europe, reminiscent of the last-mile logistics rush during the pandemic.
However, the additional space demand poses challenges in terms of energy supply.
New grid connections take years to establish, making short-term space excess unlikely.

Strategic Locations and Demand

Data centers tend to cluster around major European business hubs such as Frankfurt, London, Amsterdam, Paris, and Dublin, strategically positioned at key communication and power cable junctions.
Low latency is crucial for businesses and AI application deployment.

The limited supply of data centers hinders adoption and drives up rental prices, with underlying demand showing no signs of slowing down.
Last year required 33 GW of space globally, with a forecasted increase to 100 GW by 2030.
Europe represents around 5 GW of this, showing a quarter growth.
Companies like Digital Realty, listed in the US, recently raised $1.7 billion to fuel further expansion.

Future Trends and Challenges

Hyperscalers – major US tech giants – drive demand in the sector, often securing pre-leased spaces on a long-term basis.
Building costs, reaching up to $1,200 per square meter, discourage speculative development due to the high power requirements, including backup generators and cooling systems.

While low-latency supply remains paramount, overall demand is expected to increase beyond traditional hubs.
Examples include repurposing locations for large-scale AI model training without serving end-users directly, as seen in the case of Britishvolt’s site near Newcastle.

The data center industry is set for rapid growth across Europe, outpacing other sectors in rental price hikes, driven by tech advancements and evolving business needs.