Data Centres

Demand for capacity in Europe remains high, and take-up of colocation data centre space is expected to outstrip new supply in 2025. At the same time, a lack of available power across metro markets will inhibit growth to some degree.

Key Takeaways

1. Take-up of colocation data centre space in Europe is expected to outstrip new supply in 2025 given strong demand from hyperscalers and providers of AI and high‑performance computing services. Providers are expected to increase prices in 2025 by 10% or more in some markets, such as London, to account for higher build costs and a lack of available space.
2. Despite a distinct lack of available power, data centre supply across Europe's five largest markets is expected to grow by a record 20% year-on-year in 2025. However, the vacancy rate in the primary markets is expected to decline given the difficulties providers are having keeping pace with strong demand from hyperscalers and AI providers
3. Data centres that are built to suit the requirements of AI providers or others with compute-intensive requirements are set to open in 2025.

Vacancy rates to hit historic lows, AI demand to spur growth

Two largest markets to account for half of supply

London and Frankfurt are expected to account for 2.5GW of capacity, or approximately half of the total data centre supply in Europe, by the end of 2025. They are forecast to be 1.3GW and 1.2GW markets, respectively. Over 70% of European take-up is expected to happen in the primary markets, including Frankfurt and London, in 2025.

European vacancy rate to remain below 10% in 2025

The vacancy rate in Europe is expected to close at 9% in 2025, a new low. The main 15 European data centre markets combined have traditionally seen a double-digit vacancy rate. However, available space is expected to decline for the fourth straight year, given strong demand for capacity and the difficulties providers are having delivering new stock due to the lack of available land and power for data centres in Europe.

Given the lack of availability in primary markets, such as Frankfurt, some organisations are likelier to take space at data centres in smaller markets where their requirements can be met.

Pricing of hyperscaler-suitable capacity to rise

Pricing for data centre space suitable for hyperscalers is set to climb by 10% or more in some markets where there is strong demand, such as Frankfurt and London, in 2025. Prices for new available capacity are expected to jump so providers can account for higher build costs. Moreover, data centre operators have greater leverage than ever in negotiations with hyperscalers and other organisations, given a distinct lack of available space across Europe. As such, prices for multiple MWs of capacity let on a long-term basis have and will continue to grow.

Figure 22: Europe data centres new supply, 2017 – 2025F

A handful of companies (i.e. the hyperscalers) are responsible for the vast majority of demand. However, colocation data centre providers have more negotiating power than ever with hyperscalers, given the limited space available in Europe. 

More AI-ready data centres to open

Data centres that are built to suit the requirements of companies with compute-intensive requirements, such as AI providers, are set to open in 2025. Bulk Data Centers, for example, is building an AI-ready data centre with 42MW of capacity that is expected to open in Kristiansand, Norway early this year.

Data centres in the Nordic countries have become attractive to GPU-as-a-service providers. This reflects the fact that, in some cases, the available power and land to build new, large data centres are sometimes more readily available in Norway and other Nordic countries than in the larger metro markets of Europe such as Paris.

As a result, we expect to see more deals to let multiple MWs of colocation data centre capacity to GPU-as-a-service providers in 2025.

AI providers need large quantities of data centre capacity in areas where low-cost renewable power is more readily available. Agreements to let 6 to 12MW in newer facilities are now the norm.

Requests are expected to come mostly from well-funded technology service providers and AI start-ups as opposed to hyperscalers. The former are wholly dedicated to the provision of services based on AI technology and therefore need capacity in significant quantities.

Figure 23: Europe data centres take-up, 2017 – 2025F