Data centre capacity in Europe will reach 13,100 megawatts by 2027, reflecting a 21% increase. This growth, Savills notes, will be widely distributed across the region and will be driven primarily by the development of Artificial Intelligence (AI).
According to the consultancy, 94 new data centre projects are expected to be completed in Europe over the next four years, adding approximately 2,800 megawatts of capacity. Despite this increase, the European data centre market is likely to continue to face a shortage of supply. With an anticipated increase in bandwidth usage at an annual rate of 31% through 2030 and AI at an average rate of 14.9%, it is estimated that the required data centre capacity would need to triple to around 22,700 MW to meet projected demand by 2027.
The Savills report also includes an analysis of 46 European cities, assessing aspects such as energy availability, security, sustainability, cost and assumed consumption, as well as constraints to developing new data centres. Medium-sized cities generally fare better in these assessments, and in the specific case of Spain, Valencia is the best positioned city, ranking 20th, followed by Barcelona and Madrid in 21st and 24th place respectively.
In terms of costs, rising demand and increasing energy and construction costs have led to a significant increase in data centre rents in Europe. Since the beginning of 2022, rents have increased on average by 36% for 4kW contracts; 47% for 10kW contracts, and 51% for 100kW contracts. Rents are expected to continue to increase by 5% to 8% per annum over the next three years.
Savills also notes that, given the need to address challenges in energy infrastructure, sustainability initiatives and expansion, significant capital investment will be required in the data centre sector. This could lead to increased investment interest from private equity funds as data centres focus on their core business.
Currently, yields on prime assets on the continent are between 5% and 6%, and are expected to remain stable for most of the year, with a possible compression towards the end of the year as market dynamics change.
