Chapter 8
Data Centres
European Real Estate Market Outlook 2024
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Demand for capacity in Europe is high, though a lack of available power across metro markets is expected to inhibit growth to varying degrees. Some organisations are likely to look for capacity in new areas where supply can be more easily sourced, and the cost of power is lower.
Key Takeaways
- Strong demand from hyperscalers is expected to push data centre take-up to new highs in 2024. Vacancy rates are likely to fall to record lows across Europe’s largest markets.
- Colocation data centre providers will likely hike rental rates further, given the lack of supply as well as the rising development and operational costs. Given an expected decline in available space, organisations are likely to seek capacity in facilities that are further from existing well-developed data centre markets.
- A lack of available power in European metro markets is expected to inhibit the growth of data centre providers looking to meet the needs of the hyperscalers who are their largest customers.
Appetite for data centre space expected to remain strong despite higher rates
Demand across Europe expected to hit new high
Most data centres are entirely pre-let to hyperscalers or are built with them in mind. Strong demand for capacity by hyperscalers is expected to push data centre take-up to a new peak (667MW) in 2024.
Large American technology companies need more capacity to ensure that future demand for their digital services can be met. Much of the next year’s take-up will be from hyperscalers looking for capacity in the submarkets where they already have a significant presence, such as Sossenheim in Frankfurt or the north of Paris.
At the same time, providers’ continued difficulties in bringing new facilities online are expected to lead the European vacancy rate to an all-time low of 10.7% in 2024.
Figure 22: Frankfurt, London, Amsterdam, Paris & Dublin New Supply, 2017 – 2024F
Source: CBRE Research
Exceptional rental rate growth expected
The combination of lower available capacity across Europe, as well as higher build and operational costs, makes it almost inevitable for providers to increase rental rates at colocation data centres in 2024. We expect rents for occupiers to reach new heights in 2024.
Figure 23: Frankfurt, London, Amsterdam, Paris & Dublin Take-up, 2017 – 2024F
Source: CBRE Research
Demand for AI requirements expected to emerge
Data centre providers in 2024 are likely to see an uptick in requests for capacity from companies with artificial intelligence (AI) requirements. These are expected to come mostly from well-funded technology service providers and AI start-ups, as opposed to hyperscalers. The former group are wholly dedicated to the provision of services based on AI technology and therefore need large-scale capacity immediately. The latter group are still exploring their requirements relative to their IT strategies and are therefore expected to take longer to issue AI-specific requirements.
More organisations expected to look further afield for capacity
More organisations are likely to take capacity in areas where supply can be more easily sourced and the cost per kWh is lower. Enterprises are having a particularly difficult time sourcing new capacity, as most of it is taken by hyperscalers before it is delivered. However, enterprises may find uncontracted and suitable supply, that is undesirable to hyperscalers, further afield.
Contacts
Andrew Jay
Head of Data Centre Solutions, Advisory & Transaction Services, Europe
