Demand for data and AI has led to a global data centre boom – and that boom is still very much ongoing, according to recent analysis from real estate advisor Knight Frank.
The firm’s global data centres report reveals a significant surge in market expansion, with a projected increase in data centre capacity worldwide by 2027. According to Knight Frank, this equates to an additional 20.82 gigawatts (GW).
Such rapid growth, which has potential to expand 177% by 2030, is underpinned by a substantial capital expenditure of £229 billion (US$297.8bn) over the forecast period.
This is a testament to skyrocketing demand for digital infrastructure, which is needed to support AI, cloud computing and enterprise digital transformation.
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Growth has potential to expand 177% by 2030
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36% drop in data centre transaction volumes in 2023, before surging 118% in 2024
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£59 million transaction value in the data sector space
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7.5% CAGR growth since 2019 (average transaction value)
“As global capital races to capture the next wave of digital infrastructure growth, the competition for prime development sites, particularly in power-constrained locations, will intensify,” says Stephen Beard, Global Head of Data Centres at Knight Frank.
“Industry stakeholders must navigate regulatory complexities, power availability concerns and sustainability requirements to remain competitive in this high-growth sector.”
Demand continues to rise in critical data centre locations
Whilst data centre translation volumes dropped in 2023, due to global interest hikes, the market suddenly rebounded in 2024 and surged 118% to £24.5 billion (US$31.9bn) across single-asset purchases, portfolio acquisitions, redevelopment opportunities, and development site sales.
We take a look at Knight Frank’s analysis for how each part of the world is reacting to the continued boom.
North America
Remaining a very dominant market, North America has achieved 11,638 MW in new capacity – which reflects a 54% growth rate and £128 billion (US$166.6bn) being deployed to support expected growth.
The North American region benefits from a combination of homegrown hyperscale dominance, increasing enterprise colocation demand and strategic expansion into emerging secondary markets, according to Knight Frank.
Within this, Ashburn and Phoenix in the US are some of the fastest-growing markets in the world. Ashburn is in Virginia, which remains the dominant destination for hyperscalers and colocation providers in the world.
Its data centre hub will grow by 2,428 MW (58%) and will be backed by £26.7 billion (US$34.7bn).
“The global data centre industry is undergoing rapid transformation, with hyperscaler and colocation providers prioritising markets that offer access to power, robust connectivity and a favourable regulatory environment. We’re increasingly seeing sustainability considerations shaping investment strategies, with an increasing focus on renewable energy adoption and energy-efficient design.”
Similarly, Phoenix has experienced a 126% surge and has attracted £12.2 billion in investment, according to Knight Frank. The city is an attractive location on account of its availability of scalable land, its business-friendly environment and strong connectivity infrastructure.
Europe, the Middle East and Africa (EMEA)
Knight Frank expects the EMEA market to expand by 4,529 MW (44%) and requires a £49.8 billion (US$64.84bn) investment. The European markets in particular are experiencing a shift towards secondary hubs like Milan and Madrid, which the firm attributes to power constraints in core markets like Frankfurt and London.
Whilst London retains its status as a leading European data centre market, ongoing power constraints in established submarkets is encouraging developers to look elsewhere in the UK.
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London is set to expand by 480 MW (36%) with £5.3 billion (US$6.9bn) of investment
On the other hand, Milan in Italy has been cited as a standout European market with a 168% growth rate, which equates to 310 MW. Requiring £3.4 billion (US$4.42bn) in investment, Knight Frank says Milan’s sudden surge indicates a broader shift in European data centre expansion towards newer hubs that are less congested.
Asia-Pacific (APAC)
APAC is forecast to see a 4,174 MW (32%) increase, according to Knight Frank, which will be supported by a £45.9 billion (US$59.74bn) investment.
This data centre market remains highly diverse and is currently seeing significant development in both established and emerging locations. Ultimately what is clear is that hyperscalers are seeking alternative opportunities for expansion.
Tokyo, Japan and Johor, Malaysia are key APAC hubs and poised for significant growth. Tokyo on the one hand is expecting a 25% increase in growth, on account of Japan’s strategic geographic location, a stable power grid and increasing demand for cloud services in the region.
Johor expects 85% and remains a huge data centre hotspot, given its proximity to Singapore and its desirable incentives for investors and developers.
Stephen adds: “Real estate investors and developers are positioning themselves to capitalise on this demand, with an emphasis on acquiring strategically located land and securing long-term power agreements.
“Operators, investors, policymakers and partners, each have a role to play in shaping this future. The task ahead is to build infrastructure that not only supports innovation but also safeguards sustainability, security and equity.”
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https://datacentremagazine.com/hyperscale/knight-frank-why-the-global-data-centre-market-is-booming
