German Data Center Market

Frankfurt

IT Load: 745 MW
Under construction: 542 MW
IT-Load in planning: 383 MW

Berlin

IT Load: 92 MW
Under construction: 76 MW
IT-Load in planning: 219 MW

The increasing relevance and ubiquity of technologies such as AI, Machine Learning, 5G and Cloud services leads to growing demand for data centers. And they will be needed soon since the amount of data transported will continue to grow significantly. The International Data Corporation (IDC) predicts that the annual volume of transported data will reach up to 284 zettabytes (ZB) by 2027. To put this into perspective, one zettabyte is approximately equivalent to a 500,000,000,000 hours long high-definition movie.

This continuously increasing volume of data needs to be addressed with new, larger, and more powerful data centers. Today, Germany plays a crucial role in the European market, with Frankfurt being the second most important location on the continent and Berlin currently experiencing tremendous growth. While emerging/tertiary markets Munich and Hamburg may not currently have a significant presence, they contribute to Germany having four notable data center locations, soon complemented by the Rhineland Region. 

Incoming regulatory changes

However, the rapidly increasing demand is leading to new requirements and regulations. Still, a local data center location is essential for companies operating in Europe, as they need to provide their customers with the shortest possible latency and compliance with local data protection requirements, such as the General Data Protection Regulation (GDPR), is easier to achieve with a server location within Europe.

The dominant core markets are still the FLAP-D markets: With an IT load of 993 MW, London continues to be the largest location for data centers in Europe. Currently, there are construction activities underway for 508 MW, and an additional 251 MW are in the planning phase. Frankfurt (745 MW capacity, 542 MW under construction, 383 MW in the planning phase) is in the second place. Amsterdam follows as the third-largest market with 506 MW (205 MW under construction, 53 MW in planning), followed by Paris with 416 MW (173 MW under construction, 148 MW in planning), and Dublin with 271 MW (159 MW under construction, 134MW in planning).

However, these markets will eventually reach their capacity limits as demand continues to grow and suitable land becomes increasingly scarce. Larger projects come with larger power requirements, which are limited. Thus, differentiation of data center locations and specifications is only a matter of time. Not only the secondary markets like Madrid (110 MW), Berlin (92 MW), and Warsaw (74 MW) are expected to benefit from this, but also smaller markets that have not yet seen significant development.

Power, power, power

These challenges have led to temporary restrictions on data center construction and the introduction of energy management requirements in places like Amsterdam. In Dublin, due to additional threats of power outages, network connections for data centers are now only approved in exceptional cases.

While Germany benefits from a high level of power supply security, the Borderstep Institute estimates the annual total energy consumption of data centers in Germany to be 17.9 billion kilowatt-hours (kWh), which is expected to rise. To put this into perspective, the city of Berlin consumed approximately 12.1 billion kWh in 2022. High power consumption already led to consequences in Frankfurt. Given that data center operators are willing to pay significantly higher prices compared to other commercial users, the development of data centers has increased. However, also in Frankfurt, land and power capacities are limited. Therefore, regulations aim to encourage a variety of different uses.

According to the Energy Efficiency Act (EnEfG), Data centers in Germany have to derive more and more of their electricity consumption from renewable sources. Also, they will be responsible for the reuse of waste heat generated during operations, whereas a main part of this is intended to be fed into district heating networks in the future.

Frankfurt

Frankfurt remains Germany's strongest data center market. Not only does it have significant financial importance, but it is also home to DE-CIX, one of the world's largest internet exchange points, offering nearly lossless access to international networks. The high demand in Frankfurt is reflected in strong pre-leasing rates (47 MW in the first quarter) and the second-lowest vacancy rate (7%) among FLAP-D-markets after Dublin.

With a computing power of around 745 MW, the capacity in the financial metropolis has doubled over the past five years. Take up saw 20 MW in the first quarter of 2024, more than any other data center metro, while 23 MW new supply was added. In 2023 alone, 134 MW was added, making it the strongest year ever for a European data center market – this record could potentially be surpassed in 2024. Currently, a total of 542 MW is under construction, with another 383 MW planned, putting Frankfurt on track to catch up significantly with Europe's market leader, London.

Berlin

After Google announced the establishment of a new cloud region in Berlin-Brandenburg, Berlin experienced astonishing development. Colocation providers followed suit, offering their customers a fast path to cloud infrastructure. Berlin's digital-savvy economy and the BCIX internet exchange are strong arguments for the German capital, as are the lower land prices compared to Frankfurt. Although power availability is also strained there, wind energy from Brandenburg can be sourced – a crucial factor for decarbonisation.

As Europe's seventh-largest market, Berlin has a computing power of 92 MW, while no new supply was added in the first quarter and no take up was registered. However, growth potential is enormous, with new developments achieving high to full pre-leasing rates. Despite being a relatively small market, there are 76 MW under construction and a notable 219 MW in planning. We forecast to see 36 MW to be added in 2024.

Rhineland Region

As expected, a new region has emerged as a significant location for data centers: the “Rheinisches Revier”. Microsoft's announcement to build two data centers in Bergheim and Bedburg until 2026 for its own cloud infrastructure and AI applications has given the region a boost. It is possible that other operators will follow suit. While proximity to internet exchange points may not be essential for AI, the location between DE-CIX and Amsterdam’s AMS-IX is still advantageous. 

• AI, ML, 5G and Cloud services lead to a rapidly growing demand for Data Centers
  
• Frankfurt continues to be Europe’s second most important data center market
• Challenges like Regulations, Energy Supply and Capacity Limits are changing the market
• Secondary markets like Berlin or Rhineland region will benefit from challenges in the core markets

This article was also published on the website of the German Datacenter Association e.V. (GDA): https://www.germandatacenters.com/datacenter-outlook-germany/