Power shortages around the world are slowing the global data center market and sending rental prices soaring, according to CBRE.
Demand for AI-related projects is soaring across Europe, but it’s difficult to meet the requirements due to the lack of access to the power and land needed, real estate companies said in a recent report.
“Power and land shortages, along with increasing regulation, are the most prominent inhibitors to data center development in Europe,” said Andrew Jay, head of European data center solutions.
“The growth of AI is creating increasing pressure as demand levels continue to rise, highlighting the need for continued investment in its development.”
The European data center market grew by around 20% year-on-year in the first quarter of this year, with strong developments in Frankfurt, London, Amsterdam and Paris, which recorded year-on-year growth rates of over 40%.
However, supply shortages remain across the continent, especially in core markets like Frankfurt. Pre-leasing of new facilities is now commonplace, indicating the need for continued investment in data center development, according to the report. Power procurement remains a major challenge.
Meanwhile, rents are rising across Europe, mainly due to the rising cost of building data centers. CBRE points out that a decline in vacancy rates due to an imbalance between supply and demand is also a factor. In Amsterdam, for example, vacancy rates fell to 11.5% in the first quarter of this year from 19.4% in the same period last year.
Singapore, the world’s most power-constrained market, has just 7.2 MW of available capacity, approaching an all-time low of 1%, while Queretaro, Mexico, has just 0.6 MW of capacity available for lease.
Singapore still has the highest rental rates at $315-480 per month for requirements of 250-500kW, while Chicago remains the cheapest at $155-165.
Meanwhile, emerging markets are attracting investment from companies looking to secure data center capacity, with demand for hyperscale capacity especially in Oslo and Madrid, which CBRE expects will drive additional investment from operators in these markets.
Despite the power shortage, data center inventory continues to grow in major markets, supported by significant construction activity, according to the report.
But CBRE warned that pre-leasing is now common practice, making it increasingly difficult for businesses to secure suitable space.
In London, demand is strong despite a shortage of supply, with hyperscalers focusing on the west London corridor but also looking further afield.
“Expected demand growth from startups, enterprises and GPU service providers is likely to be challenged by lack of capacity, limited power supply and few local AI-enabled data centers. Hyperscalers and enterprises may struggle to find available power in the largest submarkets,” the report warned.
“However, areas with lower data centre concentrations well outside of London’s main areas may have more options. As a result, London’s development footprint is likely to grow even after major substation upgrades.”
