Readying for rapid growth
After a period of recalibration, Europe’s data centre sector is accelerating again. Demand remains strong, but the ability to convert ambition into delivered capacity is increasingly shaped by power access, planning timelines and execution capability.
It was supposed to be the year when Europe started work on laying the foundations for AI. But in April 2025, some hyperscale cloud providers hit the brakes on select, early-stage data centre construction and international leasing projects.
One reason was the hyperscalers’ need to recalibrate their designs, as the costs and demand for liquid cooling were better understood. But strategy adjustments, industry mergers and an increasingly discerning investor base also played a part.
This pause did little to slow the rapid pace of data centre commissioning and construction in Europe, our latest survey of data centre operators and construction contractors shows. In 2025, operators commissioned 47MW of capacity, on average, exactly what they had forecast in last year’s survey. And contractors built even more than anticipated.
But it revealed the pressure that the supply chain had been under, especially for long-lead equipment (LLE). With some future projects on hold, prices and lead times improved for the first time in years.
“By September, when vendors hadn't received orders, we saw more competitiveness around pricing and a significant reduction in lead times,” recalls David Byrne, Chief Revenue Officer at specialist construction contractor Mercury Engineering.
This effect was short lived. In the closing months of 2025, the hyperscalers were back to full speed – and the supply chain pressure had returned. “We’re seeing capacity constraints again,” says Byrne. “Generator and equipment lead times that went down from 52 weeks to 38 [in 2025] are quickly going back up to 52 weeks, and maybe more.”
Ever-growing demand
This year, that pressure will intensify even further, our survey suggests. Data centre operators each expect to commission 67MW of capacity in 2026, on average, a 42% increase from last year’s number, and a staggering 319% increase since 2023 (Figure 1).
Figure 1. Data centre operators continue to expand their annual rate of commissioning. How many MW of data centre capacity did your organisation commission [last year]? And how many do you expect it to commission in [the coming year]? (average among operators, MW)
There is no shortage of demand to drive that growth. For the second year running, respondents expect AI to be the primary driver of demand in Europe for the next three years. And, little wonder, given the staggering ambition of the AI sector – ChatGPT-maker OpenAI alone has committed to developing 30GW of capacity globally, more than Europe’s combined data centre footprint today.
This AI demand reshapes the nature and geography of Europe’s data centre construction pipeline. Training workloads, which require high power density but not low latency, are giving rise to large campus developments in the Nordics, where clean energy is abundant. The need for AI inference close to the end-user, meanwhile, is adding pressure in already-crowded Tier 1 markets. Neoclouds, often backed by private equity, have sprung up to fill pockets of demand for GPUs to support AI workloads.
AI projects are being prioritised by regulators and grid operators, says Sam Baker, Vice President at insurance broker and risk management consultancy Lockton Companies LLP.
“With AI, you've got higher economic value per megawatt – more tax, more jobs, more demand for technically skilled people,” he explains. “All that helps with planning and political support, which can improve the likelihood of approval compared with traditional workloads.”
And while AI facilities have been much discussed in recent years, only now are they starting to be built at scale in Europe, says Ben Pritchard, CEO of data centre energy system provider AVK. “The headlines were probably a year or two early, but now we’re seeing them start to really materialise.”
But AI is far from the only driver of demand for data centre capacity. Almost as many respondents see cloud, 5G/6G, high-performance computing and sustainable IT as top growth drivers, for example (Figure 2). And, unlike cloud before it, AI demand is not replacing the need for previous technology platforms.
As a result, intense demand in Tier 1 markets is spilling over, not only into the Nordics, but also Spain, Italy and Poland, as well as cities outside the FLAP-D core, such as Berlin.
Figure 2. AI is far from the only driver of data centre demand in Europe. Which of the following trends do you expect to be the greatest drivers of data centre demand in Europe in the next five years? (percentage of operators and contractors, multiple choice)
Reputations on the line
Notwithstanding another recalibration by the hyperscalers, a lack of demand is not the data centre sector’s biggest problem. Meeting that demand is.
The greatest hurdles are familiar to everyone in the industry. Limited or delayed access to power is the top-ranked barrier to operators’ ability to grow, our survey shows (Figure 3). This is unlikely to be toppled any time soon and is largely addressed through the ruthless pursuit of viable sites.
In second place is permitting delays. “Permitting is getting harder and harder,” says Bruce Stephenson, Chief Development Officer at developer/operator hscale. “Local authorities may stipulate five, six or seven months to determine a permit. In reality, that becomes nine to 12. On top of that, environmental permitting, handled by a standalone authority, takes at least 12 months, and often up to 18, with many jurisdictions now linking the grant of the building permit to the issuance of the environmental permit.”
Figure 3. Supply chain constraints are the third greatest barrier to expanding data centre capacity. Which of the following are the biggest challenges to your/your clients’ ability to expand your/their data centre capacity? (percentage of operators and contractors, rank 1-3)
Click image to enlarge
The price and lead time of materials and equipment rank third. As we’ve already seen, supply chain constraints ramp up again following last year’s leasing pause. These constraints are unlikely to bring a data centre construction project to a complete halt. But by jeopardising project budgets and delivery schedules, they place operators and their contractors at considerable risk, explains Baker.
“The lease agreements and SLAs that operators sign with hyperscalers are very onerous,” he says. “The penalties for not achieving ready-for-service (RFS) on the agreed dates are severe.”
For example, operators often promise their occupants rent-free credits as compensation for delays, so a three- or four-month delay can mean six to eight months without the expected revenue. With the financial model for many facilities already stretched by the leasing pause and years of rising costs, few can afford this kind of penalty.
The chance of expensive delays is increasing as the scale and complexity of projects grows, Baker adds. “We're seeing greater risk concentration: larger, more power-dense, more bespoke projects. That increases reliance on a narrower set of suppliers and contractors, which makes delays more likely.”
It’s not just hyperscaler occupants who have a keen eye on delivery. Speed to market is among investors’ top priorities when assessing projects to support, survey respondents say.
“Investors are increasingly focused on understanding the downsides of entering the data centre space,” Baker explains. “The construction-delivery phase is a major part of that. These are highly technical systems; a lot can go wrong in delivery, and delays put financial investment at substantial risk.
“If there's a significant delay due to a supply chain issue that could have been foreseen, in the worst-case scenario, the tenant might pull out entirely. That's a huge risk for a lender.”
“We're seeing that reflected more in facility agreements,” he adds. “Lenders are trying to pass more of their potential financial risk onto the owner, more so than in traditional real-estate investment.”
As hscale’s Stephenson explains, supply chain constraints put data centre operators and their contractors at risk of disappointing two highly demanding stakeholders. “If a project is late, it damages our customer reputation. If it's over budget, it hurts our investor relationship.”
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