Data Center Bytes

With record low vacancy rates and increasing price points, Europe has become a true seller’s market across the data center landscape. As demand for cloud services and AI continues to grow, hyperscalers and colocation parties turn their eyes and wallets to Europe—with a focus on both Nordic countries that are leading the pack on digitization and countries with a fast-growing interest in data centers, such as Spain, which has seen the biggest uptick in interest in cloudification. Let’s take a closer look at the four main drivers of demand within this dynamic market.

KEY DEMAND DRIVERS

1. Growing Cloud Adoption
   As mentioned above, Nordic countries (especially Finland, Sweden, Norway, and Denmark) have long led the pack on converting their information into digital form. These countries continue to have high demand for and are home to many data centers. In terms of pure growth, France, Germany, and especially Spain have seen the sharpest uptick, with a particular interest in cloudifcation (moving a service to the internet) of business functions (storage, emails, CRMs).
2. Increasing Data Traffic
   The increased demand for digitation and cloudifcation of both data and services, combined with the emergence of 5G and the increased availability of fiber and connectivity, has seen a giant influx of data that needs to be processed, stored, and moved. This high volume of data traffic can be seen both on the consumer side (streaming services) and the business side (video conferencing).
3. New AI and High-Performance Computing (HPC) Cases
   While Europe remains behind the United States in AI technology and adoption, there has been steady growth of 17% year over year in demand for these services, which fall into two main buckets—AI training and AI inference (or using AI). The bulk of AI training belongs to machine learning, again with Nordic countries leading with an energy and industrial industry focus.
4. Hyperscalers Lease Strategy
   Perhaps the biggest driver of demand for data centers comes from hyperscalers who are looking to quickly and efficiently scale up their capabilities within the space. Hyperscalers encounter a wide variety of issues from pricing and connectivity to sustainability and reliability of the grid. The most critical of these issues remains location—for both proximity to a power source and scalability—leading to the prominence of leasing over self-building of these data centers. It’s estimated that 75% of hyperscalers are now utilizing leases, citing increased flexibility with both entering and exiting the market, lack of construction, and lower capital investment as reasons that make leasing the more attractive option. Key locations of interest to hyperscalers include Madrid, Vienna, Warsaw, Berlin, Munich, and Prague.

Growing cloud adoption, increased data traffic, new AI and HPC cases, and hyperscaler leasing strategies continue to drive demand for data centers across Europe. To learn more about what is driving the supply side, as well as M&A trends, request a copy of the recording of our recent Data Center Bytes: Trends in Europe webinar.