According to Savills latest research, the European data centre power capacity is projected to rise to approximately 13,100 MW by 2027, reflecting a 21% increase. Similarly, total international bandwidth usage in Europe is predicted to rise by a 31% compound annual growth rate (CAGR) by 2030.
The growth of the data centre market is expected to be evenly spread across Europe, primarily driven by the significant impact of Artificial Intelligence (AI) on the industry. The European AI market is forecasted to grow at a robust annual rate of 15.9% (CAGR 2024-2030), serving as a key driver for the surge in data centre demand.
According to the international real estate advisor, 94 new European data centre projects are due to be delivered in the next four years, totalling approximately 2,800 MW.
Scott Newcombe, EMEA Head of Data Centres at Savills, comments: “Despite the high number of new data centres anticipated to be built by 2027, the market is expected to remain largely undersupplied across Europe. Given the projected expansion of internet bandwidth usage, European data centre capacity needs to triple by 2027 and reach around 22,700 MW in power so there remains a significant supply/demand gap.
“We believe that prime yields, currently standing at 5-6% on the continent, will remain stable for most of the year, with a slight inward movement towards the end of the year as market dynamics evolve.”
Between 2022 and 2023, construction costs for a data centre increased by 6.5%, reaching $9.1 million per MW (€8.4 million) on average across Europe, according to Turner & Townsend. Zurich is Europe’s most expensive market for developing a new data centre and the second most expensive in the world, after Tokyo. London is the second most expensive market in Europe, followed by Frankfurt.
Increasing demand, combined with escalating energy and construction costs, has caused a significant surge in average asking prices across European colocation markets. Since the onset of 2022, there has been an average uptick of 36% for 4kW leases, 47% for 10kW leases, and 51% for 100kW leases. Over the next three years, the international real estate advisor anticipates asking rent to rise by 5% to 8% year-on-year.
Lydia Brissy, Director in Savills European commercial research team, says: “Given the combined challenges of energy infrastructure, sustainability initiatives, scale expansion, and mitigating obsolescence risk, the data centre industry will require significant capital expenditure (CapEx). As a result, rising private equity flows are anticipated in the market as the industry seeks to invest in its core business.”
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