European site selection in a shifting landscape

The European data center landscape is receiving an unprecedented level of investment in both established and new markets. Driven by advanced cloud services, growing levels of content and new AI applications, data levels and processing capacity needs are shooting up. While these demand levels are creating challenges for supply, we should see this phase of investment as an opportunity to deliver new scalable locations that address both growing power demands and the energy transition.

FLAPD headwinds

This year, a supply-demand imbalance is once again forecast for Frankfurt, London, Amsterdam, Paris and Dublin (FLAPD) the five largest markets in Europe, with 440 MW of take-up and 387 MW of new supply predicted (CBRE). While a lot of this growing demand is being addressed by expanding the metro definition to more facility-friendly locations adjacent to hubs, not all markets can rise to the challenge. The points at which FLAPD supply is falling short just now are Amsterdam and Dublin, where expansion has all but ground to a halt. Take up this year in Amsterdam will be a fraction of last year (15 MW v 102 MW: CBRE). Even this year’s modest forecast of 51 MW take-up in Dublin will put extreme pressure on the network of utility operator EirGrid.

New hubs

Secondary markets are taking up much of the slack this creates. In the first quarter of this year the top 15 secondary markets grew their share of overall capacity inventory to 28%. 90% of this year’s expected secondary market takeup will be in Berlin, Madrid, Milan, Oslo and Warsaw. By the end of the year it is forecast that over 40% of total European demand will be met by secondary markets.

This phenomenal growth in secondary markets is partly due to the anticipated requirements of AI. Infrastructure for training models will be less location-sensitive than traditional consumer clouds. For this reason, locations like the Nordics or southern Europe and other secondary hubs are eminently practical choices. With compound growth we can expect to see a fast-changing landscape as the more mature secondary hubs catch up with power-constrained FLAPD hubs. In addition, there are exciting opportunities to be had in a range of other growing hubs like Copenhagen and Stockholm, and emerging smaller markets such as Barcelona, Brussels, Leipzig, Lisbon, Marseille, Oslo, Prague, Rome, Vienna and Zurich.

Powering the cloud

Even with expanding geographies, matching strategic sites with power will continue to be our single biggest challenge. This extends to the fastest-growing secondary markets, where power constraints are emerging. In cities like Berlin, growth has been so rapid that city councils are becoming more reticent, and some power stations are simply full up. This challenge is now a fact of life. Demand-driven energy constraints will likely be the new normal for the key markets for at least the next 5 to 6 years.

Community concerns

In addition to power constraints, data center operators face shifting community attitudes, and political pressures. Responsible data center providers need to address these concerns from regulation and planning through build to operation, and engage positively with their local communities sustainably, for the long term.

To safeguard our future we need to be clearly on the climate solution side, with full decarbonization of customer IT a top priority. BREEAM build certification, clear and honest communication of decarbonization efforts, and contribution to local power resilience, heating, connectivity, employment and communities will go a long way to achieving this.

Being a force for good in our communities is a critical precondition to the upcoming power demands of AI. Gigawatt campuses are already being planned in North America and they will come to Europe soon. These developments have a huge social and environmental impact and we must be ready to address this proactively and transparently.

Low-carbon locations: From challenge to opportunity

Europe is a world leader in renewable power. Thanks to the impressive growth of the European renewables market, more than 50% of total EU power is now generated by renewables, and new feeds are coming online all the time. At the same time AI requirements are loosening up traditional geographic constraints in Europe on site selection, making it possible to identify and build new sites as and where low-carbon energy sources come online.

This represents a major opportunity for the industry. Utility grids are struggling to modernize fast enough for both the energy and digital transitions, and fiber-optic cables are cheaper and easier to build than power transmission. If we embrace decarbonization at a site selection as well as operational level we will be able to address the needs of our communities, our customers and the climate, helping to position Europe as a center of excellence for low-carbon digital infrastructure.