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European Data Centre Space Shortage Intensifies Amid AI Demand Surge

 |  February 27, 2024

Industry insiders have raised alarms over the escalating shortage of space in European data centres, attributing the crisis to the skyrocketing demand for artificial intelligence (AI) technologies coupled with limited expansion opportunities.

Speaking at a conference in Amsterdam on Tuesday, Kevin Restivo, who leads European data centre research at CBRE, painted a grim picture of the situation. “There is no relief in sight,” he remarked, highlighting the critical challenges faced by data centre operators in meeting the escalating demands for space and electricity, reported Reuters.

Major players in the industry, including Amazon, Microsoft, Google, Meta, Oracle, and ByteDance, the parent company of TikTok, are racing to expand their infrastructure to accommodate the surge in demand. However, despite their efforts, the availability of suitable space and access to electricity are failing to keep pace.

CBRE’s projections indicate a concerning trend, with average vacancy rates across Europe’s largest markets—Frankfurt, London, Amsterdam, Paris, and Dublin—expected to plummet to a new low of 8.2% in 2024. This follows a previous record low of 10.6% recorded at the end of 2023.

While the rising prices of data centres offer a silver lining for operators, Restivo emphasized that this exacerbates the challenges for enterprises and businesses across Europe. “There is less space than ever for the enterprises, for the businesses of Europe,” he lamented.

Despite expectations of capacity expansion in second-tier markets such as Berlin, Milan, Zurich, and Warsaw by more than 10% this year, vacancy rates in these regions are also witnessing a decline.

Stijn Grove, the director of the Dutch Data Centre Association, dismissed calls for European “sovereignty” in cloud computing and AI as unrealistic. He pointed out that tech giants like Amazon, Microsoft, and Google possess the financial leverage to secure scarce resources, including power and data centre chips manufactured by Nvidia.

The intensifying space shortage in European data centres raises concerns about the region’s ability to keep pace with the burgeoning demand for AI and cloud services.

Source: Reuters