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Data centers: Why demand exceeds supply

Data centers: Why demand exceeds supply
Data centers: Why demand exceeds supply

Many companies operate data centers, including Linz AG.

Driven by the rapid development of artificial intelligence (AI) and constantly growing data volumes, the demand for storage and computing capacity and real estate will increase in the coming years. In addition, data centers are becoming increasingly important as investment products. This is what the real estate service provider JLL assumes in its new outlook. However, new regulations pose challenges for investors and owners, it says.

Data centers are benefiting from advancing digitalization. The almost universal use of the Internet has given the industry a strong boost in Europe. Accordingly, demand from investors has also risen sharply. In addition, returns are generally higher than with traditional real estate investments. As a result of the increasing data volume, new data centers are increasingly being planned across Europe.

According to the JLL study, Europe is dominated by the so-called FLAP-D markets (Frankfurt, London, Amsterdam, Paris and Dublin). With a total IT capacity of 949 megawatts, London remains at the top, followed by Frankfurt with 724 MW. This year alone, the IT load in Frankfurt is expected to increase by a further 205 megawatts. The next places are taken by Amsterdam (500 MW), Paris (379 MW) and Dublin (232 MW).

  • Continue reading: How AI is increasing Google and Microsoft’s carbon footprint

Expensive electricity, expensive cooling

The range of objects that will be needed to meet the increasing demand in the coming years extends from small data centers (edge ​​centers) to colocation centers and mega data centers (hyperscalers). The power consumption could be more than 500 megawatts and thus higher than that of a small town. The investment volume in Germany will be around 35 billion euros by 2030. The need for financing will increase accordingly.

According to Stephan Freitas Krause of KfW-IPEX-Bank, in contrast to traditional real estate, the majority of the investment costs of data centers go into the technical infrastructure such as electricity, cooling or connectivity. This accounts for up to 80 percent of the total costs. The boom in data centers shows how important it is that digitization and sustainability go hand in hand, says the JLL study. On the one hand, data centers are needed to further advance digitization and make the economy more sustainable. On the other hand, data centers in particular consume a lot of energy.

Half from renewable energies

Even if supply is increasing, it cannot keep up with demand, according to the JLL market report. In order to guarantee future technologies and low latency, additional on-site computing power is required – which European operators prefer to opt for anyway in order to meet the requirements of the General Data Protection Regulation.

In addition to the search for suitable space, the requirements for existing and new buildings are also increasing, it is said: Even today, data centers worldwide must cover 50 percent of their electricity consumption with renewable energy.

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