Governments around the world have been closely monitoring the development of data centers to address sustainability concerns arising from the energy-intensive facilities.

Take Singapore, a top hub for data centers. In 2019, the city-state imposed a moratorium to moderate the growth of new data centers in an effort to find a balance between environmental sustainability and supporting business needs.

Other countries such as the Netherlands and Ireland have also paused new builds to reduce the strain on power grids.

But in most cases, construction has resumed. In July, Singapore awarded 80 megawatts of new capacity to four data center operators as part of a pilot program. Permanently halting construction just wasn’t a viable option amid rapidly expanding data processing needs and storage requirements.

“Governments have the responsibility to manage resources and balance competing demands from different industries,” says Bob Tan, Executive Director, Capital Markets Transactions, JLL.

“This not only includes considerations on energy and utilities consumption, but also land usage and allocation — whether it’s better used for data centers or a variety of other industries such as value-added manufacturing services,” he says.

Excessive regulation may backfire, however, and potentially result in an outflow of supply to neighboring markets.

Singapore, for instance, has to juggle commitments to international climate change agreements along with retaining its status as Southeast Asia’s digital economy hub, says Dr. Glen Duncan, Head of Data Center Research, Asia Pacific, JLL.

“As the government restricts supply, there has been a spillover effect whereby operators are choosing to establish new hubs in nearby markets, namely Johor Bahru and Batam, where there is available land and is still accessible and affordable to manage workloads,” he says.

In Europe, cities like Berlin, Madrid, and Stockholm have likewise benefited from the spillover from mature data center markets where acquiring powered land is difficult, according to Thorpe.

Hence, striking a fine balance between regulation and development is key to enabling continued progress.

“This can be managed by housing critical workloads locally and only pushing the non-critical functions to these overflow sites,” says Duncan. “Doing so will allow governments to retain a certain level of control without hindering growth.”