In the rapidly advancing digital age, data centers in Europe are emerging as critical infrastructure, ensuring the seamless delivery of on-demand services and applications across various industries. The development of these facilities and networks are essential in meeting the estimated 90-fold increase in data consumption from 2010 to 2025. As a result, there are profound changes and trends in the data center sector, driven by increasing data generation, artificial intelligence (AI) demands, and robust cloud computing growth.
Understanding data centres
Data centers are specialized facilities that house IT infrastructure, including servers, data storage drives, and network equipment. They play a pivotal role in managing and processing vast amounts of data, necessitating significant power and sometimes water resources to maintain continuous operations. Data centers can be divided into several types, such as enterprise, wholesale colocation, retail colocation, and hyperscale, each serving different customer needs and scale requirements.
Key Factors Driving Sector Growth
The data center industry is witnessing exponential growth due to several key drivers:
- Surge in Data Generation and Storage Requirements: The rise of big data and the Internet of Things (IoT) has dramatically increased the volume of data, necessitating more storage and processing capabilities.
- Cloud Computing Expansion: The shift towards cloud computing requires substantial data center infrastructure, as enterprises prefer off-site data storage and processing.
- Business Continuity and Disaster Recovery: Data centers are essential for ensuring uninterrupted business operations and effective disaster recovery solutions.
- Government Regulations: Policies like GDPR mandate local data storage, further driving the demand for more regional data centers.
- Technological Advancement: The development of new technologies such as 5G, edge computing, AI and more require the continued evolution of data centers.
The European landscape
The FLAPD markets (Frankfurt, London, Amsterdam, Paris, and Dublin) are the largest in Europe, with secondary markets like Berlin, Brussels, Milan and Stockholm also growing. Investment in data centers continues to be strong, with hyperscalers (e.g., Amazon Web Services, Microsoft, and Google) being the largest purchasers of capacity. Global enterprise spending on cloud infrastructure increased to $270 billion in 2023 (+20% year-over-year), while global AI revenues are forecast to see a ten-fold increase for the period 2021 to 2028, underpinning the demand for data centers. Belgium is also participating in this trend. The country commands a position in Europe’s ‘secondary’ data centre markets on account of its strategic central location, quality infrastructure, key industrial hubs, government incentives and modest energy prices. There are currently 46 data centres throughout the country, primarily concentrated in the Brussels periphery (Data Center Map). The Brussels/Leuven-Antwerp-Ghent triangle accounts for three-quarters of the country’s data centres. Development is ongoing, including Google expanding its footprint with an additional facility in Wallonia and Microsoft building data centres in the Brussels periphery, as are KevlinX and LCL Data Centers. The development and occupational markets are also supporting an investment market. In Q1 2024, Ghelamco sold its new Nexus Data Centre in the Brussels Periphery to a large European data centre investor in one of the more noteworthy deals of the year.
Sector challenges and considerations
Despite the promising growth, the data center sector faces several challenges:
- Power and Land Availability: Major markets are experiencing constraints in power availability and suitable land, leading to increased prices and potential delays in new developments.
- Technological Obsolescence: Rapid advancements in technology can render existing facilities outdated, necessitating continuous upgrades.
- Regulatory and Environmental Concerns: Operators must navigate complex regulations and address environmental impacts, particularly relating to power usage and sustainability.
Final thoughts
Powerful and lasting secular trends are powering the demand for data centers in Europe and across the globe. Familiar obstacles may hinder their expansion, as will new challenges such as technological obsolescence, power availability and even skilled personnel shortages. Still, continued growth is forecasted across many dimensions which will bring further maturity to this market and provide new opportunities for both end users and investors.
