UK data center industry growth faces serious challenges
The UK will be a high-growth area for data centers, according to one property consultancy, but outdated energy grids could complicate growth.
Research from Ceres Property noted that annual revenue from data centers is up by $6 billion since 2017, topping more than $18bn this year.
The consultancy predicted the UK would continue to see significant growth — no surprise given the infrastructure demands of the AI boom.
In the US, the government announced $500 billion in private data center investment to power AI. In the UK, data centers have been designated as critical national infrastructure amid warnings that the country lacks enough infrastructure to keep up with the AI race, despite ranking third for such capacity after the US and Germany.
That said, the UK has seen recent investment, with Blackstone planning a £10 billion data center in Northumberland and Latos setting up shop with plans for 40 new sites.
“There’s no doubt that the data center sector has seen a period of considerable and consistent boom in recent years, as emerging technologies such as AI have driven demand for such infrastructure and services substantially,” said Peter Cole, Partner at Ceres Property.
“This trend is only set to continue as the further development and adoption of technologies such as AI reshape both our professional and personal lives, however, such growth is not without its complications,” said Cole.
Data center boom challenges
Indeed, all that growth raises challenges, with two-fifths of data centers facing constraints in power availability, according to a Gartner prediction.
Grids are struggling to keep up across Europe — with one report calling for hundreds of billions of investment in order to catch up — and the amount of power used by data centers is expected to triple in the US.
“As the figures also suggest, energy consumption is a key issue, with the grid already close to capacity causing long delays with respect to connection dates,” Cole said.
“Whilst grid reform and an inevitable push towards green energy are some solutions to the problem, it will be very challenging to find a wholly green data center and the majority of data centers already require back ups to their backs ups to avoid any doomsday scenarios.”
All that energy use could impact net-zero plans — as may already be the case in tech-friendly Ireland — with data centers demanding huge amounts of power that outstrip the development of renewable sources. The issue has prompted some AI developers such as Google and Amazon to turn to nuclear energy.
Similarly, not everyone is keen on having a data center next door, with complaints from locals representing one potential drag on development — though a survey from CyrusOne suggests Brits became more positive once the purpose of a data center was better explained.
Beyond that, Cole warned that landowners should ensure they benefit from the growth in data centers, rather than handing the potential revenue rewards to developers — especially with margins topping 50%.
“Many developers are taking the approach of identifying industrial or logistical sites with the aim of changing their planning use and, if they can establish the principle of a big shed, it doesn’t take much to significantly increase value,” Cole said.
“Landowners need to be aware of this and restrict use in order to protect themselves, so that they can reap the rewards of any value uplift themselves.
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