Europe Faces Data Centre Space Shortage as AI Demand Surges

European Data Centre Expansion Falls Short of AI Demand

European data centres are set to expand their capacity by 22% in 2025, yet industry analysts warn this growth will be insufficient to meet the surging demand driven by artificial intelligence (AI) technologies. This shortage raises concerns about Europe's competitiveness in the global AI race 1

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Capacity Expansion and Demand Mismatch

Kevin Restivo, director of data centre research at consultancy CBRE, highlighted the critical situation at the Kickstart Europe conference, stating, "Providers can't build supply fast enough to keep up with demand" 1

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. The forecasted capacity coming online this year is expected to be around 9.1 gigawatts, with hyperscalers like Google and Amazon accounting for more than a third of this expansion 1

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Geographic Shifts and Challenges

The space shortage is most acute in traditional European data centre hubs such as Frankfurt, London, Amsterdam, Paris, and Dublin. These locations face constraints due to electric grid limitations, forcing companies to look towards secondary markets 1

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. Cities like Milan, Warsaw, and Berlin are experiencing the fastest growth, with firms increasingly exploring options outside urban areas 1

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Economic Implications

The European data centre industry's expansion is estimated to be worth over 100 billion euros this year. CBRE estimates the average cost to build "colocation" space in a data centre at 12 million euros ($12.50 million) per megawatt 1

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. However, this investment pales in comparison to ongoing U.S. initiatives, such as the "Stargate" project involving Oracle, Microsoft, and OpenAI, which plans to invest $500 billion over the next four years 1

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Global Competition and Energy Efficiency

The data centre space shortage comes at a time when global competition in AI is intensifying. China's DeepSeek recently made waves by introducing the prospect of more energy-efficient AI models 1

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. However, this development is unlikely to alleviate Europe's immediate challenges of electric grid congestion and shortage of suitable sites for new centres.

Concerns for Europe's Technological Future

Stijn Grove, managing director of the Dutch Data Center Association, expressed concern about Europe's position in the global AI landscape, stating, "Europe risks falling into technological dependency, watching as AI leadership consolidates between the U.S. and China" 1

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. This sentiment underscores the urgency for Europe to address its data centre capacity issues to remain competitive in the rapidly evolving AI sector.

As the demand for AI-linked space continues to grow, Europe faces the challenge of not only expanding its data centre capacity but also addressing infrastructure limitations and energy constraints. The coming years will be crucial in determining whether Europe can close the gap with the U.S. and China in the race for AI dominance.