According to JLL in its latest market research, there is a dynamic shift in the European demand and supply of data storage capacity, indicating that the data center industry landscapes in Europe are ready for transformative growth. Data center core as well as secondary markets in Europe are anticipated to see significant growth in the future, according to the findings, which are relevant to an audience interested in the convergence of real estate, technology, and business advancements.
Frankfurt, London, Amsterdam, Paris, and Dublin are the main markets in the FLAPD regions, and they are leading this rise. It is projected that in 2024, these regions will welcome an increase in data center capacity of 467 megawatts (MW), according to JLL in its report. This expansion would represent a significant 16% surge in storage capacity, illustrating a robust demand for data handling and storage facilities in these critical nodes of the digital economy.
However, the narrative of growth isn’t confined to these tech hubs alone. Secondary markets, identified as the emerging frontiers of data center development, are also set to witness substantial expansions. Cities like Madrid, Berlin, and Warsaw are on the cusp of a 49% average increase in their market size. Madrid, in particular, stands out with an anticipated addition of 58MW to its data center capacity.
The year 2023 set a remarkable precedent for the sector, with the FLAPD markets alone recording a 19% year-over-year rise in data center uptake, totaling 352MW. This increase underscored the largest annual rise ever witnessed in the core market size, surging by sixteen percent. Frankfurt led this exceptional growth, both in market growth and take up, marking a new record with 119MW of take up – a 20% increase from the previous year.
Rapidly Increasing Demand for Data Center Expansion
Pre-leasing activity remained strong, with 511MW of pre-lets in 2023 – a 6% YoY increase, according to JLL in its report. Declining vacancy rates caused an increase in average colocation rent of 9% to 13%. From $0.76 billion in 2022 to $2.34 billion in 2023, the sector saw more than double the amount of investment in Europe. These cash inflows highlight how data centers are becoming more and more recognized as essential components of the digital economy, supporting anything from cloud computing services to the rapidly developing field of artificial intelligence.
In a nutshell, Tom Glover, Head of Data Center Transactions for EMEA at JLL, articulated the motivation for this development: “Demand for the real estate required to meet the demands of a world increasingly driven by data, artificial intelligence, and the Internet will only increase. The phrase accurately captures the fundamental forces driving the industry’s growth: an unwavering need for digital infrastructure to facilitate the rapidly developing fields of online connectivity, data interchange, and digital transactions.”
There are difficulties though with the demand spike and the ensuing development activities. Daniel Thorpe, JLL’s Data Center Research Lead for EMEA, highlighted the continuous challenge of meeting the rapidly increasing demand for data center expansion. According to him, this imbalance is likely to continue until 2024, driving up rents and maintaining low vacancy rates for new units.
