European markets are lagging the US on Data Centre (DC) growth, say Chris Brown, Morgan Mullooly and Bernice Kwok from KPMG’s strategy team. Double digit DC growth over the next decade is required for Europe to ensure data resiliency as critical sectors, but it is critical that the sector takes the right steps to evolve and grow in a sustainable manner.

Key highlights

Beyond FLAP

In Europe, major financial centres, being willing to pay for improved latency to high to support high frequency trading platforms, have driven much development of DCs. As such, European DCs have tended to cluster around the so-called FLAP markets: Frankfurt, London, Amsterdam, Paris. However, there is limited scope to expand in these expensive urban locations, due to constraints on space, cost and energy. Our report looks at some of the alternative European cities that can become the next leading locations for DC development across Europe.

Not just DCs: a strong value chain

How and which players benefit from this anticipated demand is nuanced. Some speculators anticipate a shifting balance of power in favour of hyper-scalers that will leave colocation service providers displaced in the DC value-chain.

Irrespective of which approach comes to dominate over the next decade, growth in the overall sector will continue to support demand throughout a complex regional value chain, including adjacent hardware such as cooling systems, servers, and backup batteries, as well as the supply chain in specialist construction and civil engineering, where UK and Irish engineering firms have developed strength.

Investors like private equity firms looking to benefit from the rising tide of DCs can look at the broad gamut of players involved in enabling growth of the sector.

Data centre operator roles

Clouds on the horizon

Of course, no sector is without its challenges. Whilst some jurisdictions are actively concerned to increase their appeal as DC locations, in others, policymakers have a poor understanding of the role DCs play in the modern economy, leading to regulatory scrutiny.


Ballooning DC demand has inevitably increased awareness of the sector’s huge energy requirements and resulting emissions impact. This awareness has placed operators under mounting pressure to green the European DC estate, which has lent a certain exceptionalism to the European DC market, which is now characterised by smaller and much more efficient builds.

There are limits however to how far design efficiencies can go, making renewable energy availability a real factor in DC sustainability strategies – indeed, many recent hyperscale projects have included their own energy generation capacity or implement circular economy concepts such as returning heat to homes and swimming pools.

Energy availability

DCs’ outsized energy demands present other issues aside from their environmental impact.

  • In Ireland, it has been noted that DCs could consume 70% of the energy generated by Ireland’s national grid by 2030 if left unchecked. This kind of coverage has already invited restrictions in some energy-constrained urban areas. Eirgrid, the stateowned electric power transmission operator in Ireland, has implemented a de facto moratorium on DCs in the Dublin region.
  • In Amsterdam, once touted as a nascent DC hub, leaders are now trying to create rules to limit DC demands for both energy and land – moves that are likely to push DC builds to other cities.
  • In London, recent DC builds have left no electricity capacity for new housing developments in certain areas of Hillingdon, Ealing, and Hounslow where DCs have sprung up, simply leaving no electrical power for other new significant connections until 2035.

Supply chain

Widespread retrofitting of existing facilities to meet growing demand whilst pursuing greater efficiencies of space inside existing facilities is happening alongside new development. This is placing never-before-seen levels of pressure on the DC supply chain which has been impacted by supply chain issues affecting the availability of semi-conductors and fibre-optic cable.


DCs that occupy massive plots in and around metro areas are often as usurpers of prime commercial and living space. In dense European cities, a likely development is that DCs will increasingly be built up instead of out. For example, in early 2021, local magistrates in Frankfurt proposed new regulations on DCs, indicating that facilities should be built taller rather than wider in order to take up less space in this city.

Talent availability

An ageing workforce across Europe as the continent transitions to a much older demographic profile, combined with technology advancements on the DC floor outpacing the upskilling of existing labour, will exacerbate a DC workforce talent shortage as demand outpaces supply of talent in the market.

Case studies

The report includes three case studies:

  • Ireland: a DC leader driven by hyperscale
  • France: a more nationally distributed market
  • Singapore: overcoming regulatory and structural impediments to growth by committing to technological innovation

Get in touch

The pace of change is challenging leaders in critical infrastructure like never before. To find out more about how KPMG perspectives and fresh thinking can help you focus on what’s next for your business or organisation, please get in touch with our team below. We’d be delighted to hear from you. 

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