AI demand and power shortages placing pressure on European data center capacity

Concept image showing US data center server room with racks glowing red.
(Image credit: Getty Images)

A shortage of power around the world is holding back the global data center market and bumping up rental prices, according to CBRE.

In a recent report, the real estate firm said that with AI-related demand increasing rapidly across Europe, it's hard to meet requirements, thanks to difficulties securing the necessary power and land.

"Power and land shortages, combined with increased regulation are the most prominent inhibiting factors when it comes to data center development in Europe," said Andrew Jay, head of data center solutions, Europe.

"There are added pressures with ever-rising demand levels as a result of AI growth, underscoring the need for ongoing investment in development."

The European data center market grew by nearly 20% year-over-year in the first quarter of this year, with significant development in Frankfurt, London, Amsterdam, and Paris - which leads at over 40% year-over-year growth.

However, supply shortages persist across the continent, especially in core markets like Frankfurt. Preleasing new facilities is now common, says the report, indicating a need for ongoing investment in data center development. Power sourcing remains a key challenge.

Meanwhile, rental rates are rising across Europe, mainly thanks to higher data center construction costs. CBRE noted that lower availability is also a factor, caused by an imbalance between supply and demand. In Amsterdam, for example, vacancy dropped to 11.5% in the first quarter this year, from 19.4% a year earlier.

In Singapore, the world's most power-constrained market, there's only 7.2 MW of available capacity and a near record-low 1% vacancy rate, while in Querétaro, Mexico there's only 0.6 MW available for lease.

Singapore still has the highest rental rates at between $315 and $480 per month for a 250- to 500-kW requirement, while Chicago still has the lowest at $155 to $165.

Meanwhile, emerging markets are attracting investment from companies looking to secure data center capacity, particularly in Oslo and Madrid, where there's rising demand for hyperscale-suitable capacity. CBRE expects operators to drive additional investment in these markets.

Despite power shortages, data center inventory continues to climb in key markets, the report found, supported by significant construction activity.


However, CBRE warned that preleasing is now common practice, making it increasingly difficult for companies to secure suitable space.

In London, despite a shortage of supply, there's significant demand, with hyperscalers focused on London’s western corridor, but also looking further afield.

"Expected demand growth from startups, enterprises and GPU-as-a-service providers will likely be challenged by capacity scarcity, limited power availability and few local AI-ready data centers. Hyperscalers and enterprises may struggle to find available power in the largest submarkets," the report warned.

"However, areas well outside of London’s main regions, with less data center concentration, may offer more options. Consequently, London’s development radius will likely expand, even after key electricity substation upgrades."

Emma Woollacott

Emma Woollacott is a freelance journalist writing for publications including the BBC, Private Eye, Forbes, Raconteur and specialist technology titles.