Europe’s Data Center Market Shifts Focus to Southern Europe and Emerging Markets
As 2026 unfolds, Europe’s data center market is experiencing a significant transformation. Traditional hubs in cities like Frankfurt, London, Amsterdam, Paris, and Dublin, known as FLAP-D, are facing challenges related to power, land availability, and regulatory constraints. In response, the spotlight is shifting towards Southern Europe and emerging frontier markets, where accelerated growth and new opportunities are emerging.
According to the European Data Centre Association (EUDCA), colocation facilities in Europe contributed nearly $35 billion (€30 billion) to the GDP in 2023. Projections indicate that this figure could reach $100 billion by 2030, with a substantial investment pipeline of around $114 billion by the end of the decade. Additionally, there is an expected annual growth rate of approximately 15% in electricity demand to support the expanding data center infrastructure.
The surge in demand for artificial intelligence (AI), particularly for large language models (LLMs) and generative AI applications, is fueling the need for advanced infrastructure, including large-scale GPU clusters. The European Union’s Cloud and AI Development Act aims to triple the region’s data center processing capacity within the next five to seven years. The act also aims to streamline approvals and provide public funding for energy-efficient facilities to stimulate further growth in the sector.
Spencer Lamb, managing director and chief commercial officer at Kao Data, believes that FLAP-D metros will remain essential hubs in Europe. However, he also anticipates a strategic shift, with FLAP-D centers continuing to attract latency-sensitive enterprise workloads, while regions with abundant and cost-effective renewable energy sources will become more attractive for large-scale AI training deployments.
Markets such as Milan, Madrid, Brussels, and the Nordic capitals are expected to gain market share as interest grows in secondary locations within and beyond FLAP-D countries, such as Manchester and Lisbon. Lamb emphasizes the importance of flexibility across multiple locations to meet varying workload requirements, including factors like power availability, connectivity, and sustainability credentials.
The focus on sustainability and energy efficiency is intensifying in the European data center market. Claire Dietz-Polte, a partner at Baker McKenzie, highlights the upcoming scrutiny on sustainability measures, including the possibility of an energy-efficiency label for data centers. To remain competitive, operators are urged to deploy energy-efficient technologies and prepare for stricter regulatory requirements.
Guillermo Rodrigo, a partner at Baker McKenzie in Madrid, predicts that hyperscalers will continue to be the primary drivers of data center investment in Europe. These companies require large-scale, reliable, and sustainable facilities to support their operations and technical standards. Hyperscalers are particularly influential in regions where connectivity, access to clean energy, and supportive regulations align to meet the growing demand for cloud and AI services.
Spain and Italy are emerging as strong growth zones in Europe, supported by favorable infrastructure, government incentives, and new subsea cable routes. Madrid and Milan have shown significant growth, driven by national broadband investments, hyperscaler-friendly policies, and their strategic locations as subsea landing points connecting Europe to Africa and the Middle East.
Daniel Thorpe, JLL’s EMEA head of data center research, emphasizes the momentum in Spain and Italy, with Madrid and Milan leading in terms of percentage growth. The arrival of major subsea cable systems, such as Meta’s 2Africa cable, is reinforcing this trend and enabling further growth in these markets. The launch of new cloud regions in Madrid and Zaragoza is attracting colocation providers and hyperscalers, leading to a clustering effect around hyperscale expansion.
Despite the abundant renewable energy sources and favorable environmental conditions in the Nordic and Eastern European markets, growth has been slower than anticipated. Municipal moratoriums, particularly in Sweden, and lower fiber density have been cited as factors contributing to the slower pace of growth. However, there is renewed interest in these regions for AI training workloads, with Norway and Finland emerging as potential locations for future data center developments.
In conclusion, the European data center market is undergoing a structural realignment towards Southern Europe and emerging markets, driven by the increasing demand for AI, sustainability measures, and the influence of hyperscalers. As traditional hubs face challenges, new opportunities are arising in regions with abundant renewable energy sources and supportive regulations, shaping the future landscape of the data center industry in Europe.
EUDCA Secretary General Michael Winterson identified Poland as Eastern Europe’s standout contender. “If you look at the numbers from Norway, Denmark, Sweden, and Poland, they are [each in the range of approximately] 1.2 to 2 GW of installed capacity,” he said. “From an economic point of view, Poland is a breakout.”
Winterson argued Poland’s rise reflects Europe’s broader cloud evolution, where market gravity followed infrastructure, talent, and policy rather than geography alone. In Poland’s case, he pointed to a similarly potent mix of drivers: sustained investments in infrastructure, education, and business attraction.
Those efforts helped pull reshoring activity into the country, initially through call centers and IT support roles, and later into higher-value digital and cloud services. Poland has also benefited from significant EU-backed infrastructure funding, which he views as an accelerant rather than the sole catalyst.
Looking ahead, Winterson foresees Poland playing a central role in the next phase of European cloud and AI development, with the Cloud and AI Development Act and the proposed AI Gigafactory program as vehicles for large-scale investment. “I’d be surprised if one of the key European investments in a gigafactory were not in Poland,” he said. “I would expect a good percentage of the €200 billion Europe plans to put into AI and digital infrastructure to go there.”
The Verne data center campus in Helsinki runs entirely on renewable energy. (Image: Verne)
Power Constraints and Planning Complexity
Dietz-Polte noted that, in many areas, power grids are not designed for data center-scale demand, making grid expansion extensive, time-consuming, and costly. “Grid operators will likely increasingly demand flexible grid connection agreements, under which data center operators will no longer be guaranteed full grid connection capacity but instead must deal with certain capacity restrictions to allow the grid operator to stabilize the grid,” she explained.
Limited capacity also creates competition for remaining connections at lucrative locations. Some projects may secure grid capacity prematurely – either before they are economically or technically ready – raising the risk of failure.
Meanwhile, stricter energy-efficiency requirements are complicating the planning process. Germany, for example, now mandates the use of renewable electricity (on the balance sheet), power usage effectiveness, and, for new builds, the reuse of waste heat. The waste-heat requirement is intended to steer data centers toward areas with municipal heat-utilization infrastructure. “However, since this infrastructure is often still under development, this creates significant uncertainties for operators in the site selection and planning process,” Dietz-Polte said.
JLL views AI as the defining force of Europe’s 2026–2027 development cycle. “We are predicting an inflection point where AI inference will overtake AI training workloads,” Thorpe said, expecting that shift in late 2026 or early 2027.
Unlike training, inference is latency-sensitive and requires distributed edge capacity near industrial and urban centers. “We will see enormous demand for inference data centers close to the end user,” Thorpe noted. By 2030, he anticipates that AI will account for approximately half of data center workloads.
Power constraints, extended approval timelines, and heightened regulatory scrutiny continue to be headwinds. Even so, Thorpe stressed that the direction is clear: “AI is the big one – and it’s going to reshape everything.”
