Private investment figures reached a record-breaking $108.1 billion globally, more than three times the previous year's total, according to Pitchbook. So is this growth sustainable?
In 2024, data centre investment volumes soared to new heights, driven by the rapid adoption of AI, cloud computing, and digitalisation across industries.
Surging data use attracts investors
Currently, data centres are one of the most attractive real estate asset classes for investors. Surging demand—fuelled by tech giants and AI startups competing for prime locations—has enabled developers and operators to command premium rents and secure long-term leases. The investment boom has been further supported by robust rental growth, low EMEA vacancy rates of just 5%, and strong institutional appetite. Despite rising interest rates, pension funds, private equity firms, and infrastructure investors continue to pour capital into the sector, attracted by its long-term stability and strong returns.
At the start of 2025, 2,870 megawatts of new data centre capacity is under construction in EMEA, with nearly 64% of this capacity pre-let, largely to cloud providers and, increasingly, AI firms. The demand and supply fundamentals remain solid, driven by the exponential growth of data and the ongoing shortage of capacity to store and process it.
But could China’s DeepSeek upend European demand?
Amid this strong momentum, the emergence of DeepSeek, a Chinese AI startup, has sparked discussions about potential shifts in data centre demand. Its AI models claim to achieve high performance with significantly lower computational power, leading to speculation that infrastructure needs could decline. However, DeepSeek’s direct impact on European data centre demand and investment will be minimal. A growing number of players in this space are accelerating technological innovation while simultaneously pushing investment costs downwards. Over time, this will likely result in lower end-user data centre costs, optimised energy usage, and improved service quality, following patterns seen in other high-growth industries.
However, the rapid influx of capital into AI and data centres also presents risks. As seen in the early 2000s tech boom, an oversaturation of new entrants and inflated valuations could lead to market volatility, with mergers, acquisitions, and stock prices fluctuating unpredictably. While this is unlikely to slow overall investment demand, it underscores the need for a measured and strategic approach to growth.
Future demand, and future challenges
Looking ahead, the investment outlook for European data centres remains highly positive. Demand for capacity is set to continue to rise, fuelled by AI-driven workloads, expanding cloud services, and the digitalisation of industries. Despite constraints—particularly in terms of energy availability—growth is expected to continue, with new capacity added across key markets. Some regions may face power shortages, prompting a shift in investment towards locations with greater energy stability or enhanced sustainability initiatives.
While volatility remains a factor, the long-term fundamentals of European data centre investment are strong. As AI advances, digital transformation will deepen, and regulatory frameworks evolve, and as a result those investors who can adapt their strategies will find ample opportunities. The challenge will be balancing rapid expansion with sustainability and cost efficiency, ensuring long-term stability amid shifting market dynamics.
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