Based on data from TeleGeography, the European data centre power capacity is expected to total 9,000 MW by 2025, yet it estimates that the number of data centres will need to increase by almost 2.5 times, through the construction of more than 3,000 data centres, providing almost 20,750 MW, to meet demand.   

Lydia Brissy, director, European Research, Savills, commented, ‘Demand for data storage has been growing rapidly since 2020 and the data boom is expected to continue for at least the next five years, with circa 72% of companies globally set to be using digital platforms and cloud computing by 2026.’

As demand for data storage continues to escalate, the market for data centres looks to be showing resilience, despite a current lacklustre economic context. In H1 some $24 bn of data centre M&A deals were closed according to Synergy Research Group, with an additional $18 bn of pending deals in the pipeline for this year.

Scott Newcome, head of Data Centres, Savills EMEA, commented, ‘2022 has marked a sharp entry of private equity into the industry, accounting for 90% of the global data centre M&A value.  Expensive to build and to manage, data centres require scale to achieve profitability, which is why they have attracted so much private equity.’

Data centres are capital intensive assets and, to meet demand for storage, the industry is currently focusing its Capex on expanding and improving its fleet to meet demand, which is driving a rise in sale and leaseback transactions.

Savills stated that prime European yields currently range between 3.6% - 4.5% across Frankfurt, London, Amsterdam and Paris (the FLAP markets).  And between 4.0% and 5.5% elsewhere in Western Europe. ‘We expect further yield compression in the next two years as the sector will continue to attract capital from an increasingly extensive range of investors,’ said Brissy.