European data centres grapple with AI-driven demand for space

People walk near a sign for Sapeon, an artificial intelligence (AI) chip company, at the Mobile World Congress (MWC) in Barcelona, Spain, February 27, 2024. REUTERS/Bruna Casas

AMSTERDAM (Reuters) - A shortage of space in European data centres is worsening, industry participants said, as booming demand for AI collides with limited expansion possibilities.

"There is no relief in sight," said Kevin Restivo, who heads European data centre research at CBRE, during a conference on the sector in Amsterdam on Tuesday.

Data centre operators such as Amazon, Microsoft, Google, Meta and Oracle and TikTok owner ByteDance are expanding as quickly as they can.

But suitable space, and access to electricity, is not keeping up. CBRE forecasts average vacancy rates across Europe's biggest markets - Frankfurt, London, Amsterdam, Paris and Dublin - will drop to a new low of 8.2% in 2024 after ending 2023 at a previous all-time low of 10.6%.

And while rising data centre prices are a bright spot in the European commercial real estate market and operators are benefiting, "there is less space than ever for the enterprises, for the businesses of Europe," Restivo said.

Although capacity in second tier markets such as Berlin, Milan, Zurich and Warsaw is expected to expand by more than 10% this year, vacancy rates there are falling too.

Stijn Grove, who directs the Dutch Data Centre Association, said calls for European "sovereignty" in cloud computing and AI were unrealistic.

Amazon, Microsoft and Google have the clout to pay up for scarce power and data centre chips made by Nvidia, he said.

"European cloud operators, there are good quality operators here large and small, but they're not the size of these American players or Chinese players, and they do not have the same tool sets that they can give their customers," he said.

Meanwhile, there is no coherent European plan to address electrical grid congestion or zoning, including "not in my backyard" sentiment.

"If you don't want the data centre, but you want the rest, that's not realistic," Grove said.

(Reporting by Toby Sterling, Editing by Alexander Smith)

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