The anticipated shortage of European data center space is poised to become a significant issue by 2025, driven by the escalating demand for artificial intelligence (AI) services.
Although a 22% increase in capacity is projected for this year, industry experts caution that supply will still fall short of meeting the burgeoning requirements of businesses and technology leaders.
This infrastructure limitation could hinder Europe’s progress in the AI sector, raising concerns about its future competitiveness.
European Data Center Space Shortage and AI Development
The rapid progression of artificial intelligence technologies is creating an extraordinary demand for data center space, especially within the European market.
Prominent global corporations, including Google and Amazon, are hastening their initiatives to establish extensive “hyperscale” facilities to accommodate this surge in demand.
Concurrently, European enterprises are actively pursuing additional data center capacity related to AI to maintain their competitive edge in the rapidly changing digital landscape.
Kevin Restivo, Director of Data Center Research at CBRE, highlighted this issue during the Kickstart Europe conference, remarking, “Providers cannot construct supply quickly enough to match demand.”
This persistent shortage underscores the urgent necessity for innovative strategies to enhance and modernize Europe’s digital infrastructure, ensuring it can adequately support the increasing demands of AI development and other emerging technologies.
Obstacles Impeding Expansion
Electric Grid Limitations and Location Scarcity
Despite ambitious plans for expansion, the shortage of data center space in Europe is intensified by two significant challenges: electric grid limitations and a scarcity of appropriate sites for new centers.
Traditional data hub cities such as Frankfurt, London, Amsterdam, Paris, and Dublin are facing severe capacity issues due to power grid constraints. These obstacles hinder the timely progression of new projects.
The Emergence of Secondary Markets
As major urban areas reach saturation, secondary markets throughout Europe are witnessing significant growth.
Cities such as Milan, Warsaw, and Berlin are projected to experience the most rapid expansion by 2025.
Organizations are increasingly seeking opportunities outside of metropolitan hubs to acquire the necessary space for their expanding AI-driven operations.
CBRE anticipates that 9.1 gigawatts of data center capacity will become operational this year, with a substantial portion exceeding one-third designed for hyperscalers, which are extensive data center facilities designed to accommodate substantial computing demands.
The Financial Implications of Expansion
Trends in Investment and Pricing
The shortage of data center space in Europe is not solely a matter of availability; it also involves financial considerations.
According to CBRE, the cost of constructing colocation facilities where businesses lease data center capacity averages around 12 million euros per megawatt. except, the European data center sector is projected to grow by over 100 billion euros in 2024.
However, this growth pales in comparison to the staggering $500 billion investment earmarked for the U.S. under the “Stargate” initiative, which encompasses major players such as Oracle, Microsoft, and OpenAI.
The Threat to Europe’s AI Dominance
As the U.S. and China make substantial investments in AI infrastructure, Europe risks lagging behind.
Stijn Grove, managing director of the Dutch Data Center Association, cautioned, “Europe risks becoming technologically dependent, observing as AI leadership becomes increasingly concentrated in the U.S. and China.”
Future Perspectives and Solutions
As the shortage of data center space in Europe becomes more acute, industry leaders are seeking methods to harmonize expansion with sustainability.
The introduction of more energy-efficient AI models, such as those recently unveiled by DeepSeek in China, may provide some relief.
Nevertheless, these innovations are unlikely to resolve the immediate issues of grid congestion and site availability in Europe.
To tackle these challenges, policymakers and industry executives are contemplating a range of strategies, including:
Development of Alternative Energy Solutions: Investing in renewable energy sources to mitigate grid congestion.
Promotion of Decentralization: Establishing data centers in less populated areas to utilize underdeveloped regions.
Regulatory Advocacy: Formulating policies that facilitate efficient infrastructure growth.
Given the rapid advancements in AI, Europe must take prompt action to surmount these challenges. Inaction could result in increased dependence on foreign technology leaders, thereby undermining the region’s influence in the future of AI.
Expert Editorial Comment
The shortage of data center space in Europe presents a formidable obstacle as the demand for AI continues to escalate. Despite ongoing efforts to enhance infrastructure, challenges such as grid congestion and site limitations remain prevalent.
While secondary markets are emerging, Europe’s leadership in AI is jeopardized by substantial investments in the United States and China. Addressing this shortage necessitates innovative energy solutions, regulatory backing, and strategic decentralization.
If Europe can effectively navigate these challenges, it can bolster its standing in the global AI competition and ensure sustainable technological advancement.
