The Landscape of European Data Centers
The European data center market has experienced exponential growth in recent years, driven by increasing digitalization, cloud computing adoption, and the proliferation of data-intensive applications. This surge in demand has led to significant investments in data center infrastructure across the continent.
Key Data Center Hubs in Europe
Several key regions have emerged as major data center hubs in Europe:
Frankfurt: A leading data center hub, offering strong connectivity, a stable political environment, and a skilled workforce.
London: A major financial center with a significant demand for data center capacity.
Amsterdam: A key interconnection hub with excellent network connectivity.
Paris: A growing data center market, driven by increased digital investment and government initiatives.
Dublin: A popular location for data centers due to its favorable tax regime and skilled workforce.
The total capacity of data centres has doubled in four years, with the United States accounting for 51% of global capacity. Europe however holds second place with 17% of all data centres, which makes them a very promising market, especially since U.S is facing some difficult availability problems. China holds third place, accounting for 16% of data centre capacity.The biggest data centre hubs are centred around Western Europe: Frankfurt, London, Amsterdam, Paris and Dublin or better known as the FLAPD markets. London and Frankfurt lead the European market with total estimated inventory respectively 1000 MW and 700 MW, while Dublin has the most capacity under construction. Despite England being historically the most active and biggest market, Germany is the leading country by number of data centres.
Particularly France and the Netherlands show growth in 2023, but the overall activity growth in Europe was remarkable with 29.7%. Besides the Netherlands and France, the FLAP-D markets are promising for investors, accounting for 80% of total MW demand in Europe. Moreover, the supply of these markets grew 17% CAGR while utilisation increased to 88%, while the secondary market grew 23% CAGR with utilisation increased to 82%. As a result of these numbers, the European data centre market shows expansion opportunities and increased popularity for organisations who are looking for alternatives for the space constrained American data centre hubs, such as North Virginia.
2024 will again be a growth year for every European data centre hub with an expected increase of 16% in data centre supply with 467 MW added to the FLAPD markets. Secondary markets in Madrid, Berlin and Warsaw will see an average 49% increase to their market size. To thrive in the European data centre markets, there are some challenges to overcome by companies.
Challenges and Opportunities
While Europe presents significant opportunities for data center operators, several challenges must be addressed:
Power and Space Constraints
The increasing demand for data center capacity has led to power and space shortages in many regions. This has driven up costs and limited expansion opportunities. To mitigate these challenges, data center operators are exploring innovative solutions such as:
Energy-Efficient Cooling Technologies: Implementing advanced cooling techniques like liquid cooling and air-side economization can reduce energy consumption.
Renewable Energy Sources: Utilizing renewable energy sources, such as solar and wind power, can help reduce the environmental impact of data centers.
Modular Data Centers: Modular data centers offer flexibility and scalability, allowing for rapid deployment and expansion.
Building new data centres drives growth and innovation, but regions worldwide are facing space and power shortages due to the high demand. CBRE predicts the vacancy rate of the FLAPD markets to drop to 8.2% in 2024, which is 2.4% lower than in 2023. As a result, second-tier markets, such as Berlin, Milan, Zurich and Warsaw are very popular for companies who seek expansion and has an expected growth of 10% in 2024. However, even in second-tier markets there is a decline in vacancy rates.
Similar challenges are faced globally, as data centre demand continues to grow. The world’s largest data centre hub, North Virginia, only had 1.8% vacancy in Q1 of 2023, which caused construction delays. The lack of availability has also led users to secondary markets, which now make up almost 20 percent of capacity under construction, JLL said.
Singapore, the world's most power-constrained data centre market, experiences less than 4 MW of available capacity and a record-low vacancy rate of less than 2%. In South-America, Querétaro, has only 1.2 MW available for lease.
Regulatory Landscape
The European Union has implemented various regulations to promote energy efficiency and sustainability in data centers. These regulations, such as the Energy Efficiency Directive, impose specific requirements on data center operators, including energy performance reporting and efficiency improvements.
Cybersecurity Threats
Data centers are increasingly targeted by cyberattacks, making cybersecurity a top priority. Robust security measures, such as firewalls, intrusion detection systems, and encryption, are essential to protect sensitive data.
Economic and Geopolitical Factors
Economic and geopolitical factors can also impact the European data center market. Factors such as Brexit, trade tensions, and geopolitical instability can create uncertainty and affect investment decisions.
The Future of Data Centers in Europe
Despite these challenges, the future of data centers in Europe remains bright. Key trends shaping the industry include:
Edge Computing: Bringing computing and storage closer to the edge of the network to reduce latency and improve performance.
Hyperscale Data Centers: Large-scale data centers operated by major cloud providers.
Sustainability and Green Data Centers: A growing focus on sustainable practices, including energy efficiency and renewable energy.
AI and Machine Learning: The increasing use of AI and machine learning in data centers to optimize operations and improve efficiency.
AI, including ChatGPT and LLMs, is both the cause and solution of data centre shortages. In November 2023, ChatGPT had 100 million active weekly users and consumed as much power daily as 33,000 households. The higher prices and shortage of power and land has pushed organisations towards innovative solutions to optimise data storage and reduce the overall data footprint.
Investing in AI proves beneficial for companies aiming to reduce their data footprint. AI technologies streamline and enhance organisational activities, leading to decreased space requirements. Generative AI, a design tool, plays a pivotal role in this process by creating efficient layouts and solutions. Traditional design methods often lead to inefficient layouts with poor airflow, resulting in overheating and wasted energy.
According to Forbes Generative AI is revolutionising data centre management through several key advancements:
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