Data centre market set for unprecedented growth

Author: Simon Rowley

Knight Frank, the global real estate adviser, has published its global data centres report, revealing a surge in market expansion – with a projected 46% increase in data centre capacity worldwide by 2027. This equates to an additional 20,828 megawatts (MW).

This rapid growth, which has the potential to expand 177% by 2030, is underpinned by a substantial capital expenditure of £229 billion over the forecast period, reflecting the intensifying demand for digital infrastructure to support AI, cloud computing, and enterprise digital transformation.

Following a 36% drop in data centre transaction volumes in 2023 due to global interest rate hikes, the market rebounded in 2024, surging 118% to £24.5 billion across single-asset purchases, portfolio acquisitions, redevelopment opportunities, and development site sales.

Globally, the average real estate transaction value in the data sector space was £59 million in 2024, up 15% on the average transaction price in 2023, and up 44% on the pre-Covid transactions value average in 2019. Since 2019, average transaction value has grown at a compound-annual-growth-rate (CAGR) of 7.5%.

Regional growth highlights

• North America remains the dominant global market, with 11,638 MW in new capacity, reflecting a 54% growth rate and a staggering £128 billion in capital being deployed to support this expected growth. The region benefits from a combination of homegrown hyperscale dominance, increasing enterprise colocation demand, and strategic expansion into emerging secondary markets.

• Europe, Middle East & Africa (EMEA) is set to expand by 4,529 MW (44%), requiring a £49.8 billion investment. European markets are experiencing a shift towards secondary hubs such as Milan and Madrid, primarily driven by power constraints in core markets like Frankfurt and London.

• Asia-Pacific (APAC) is forecast to see a 4,174 MW (32%) increase, supported by a £45.9 billion investment. APAC remains a highly diverse market, with significant development in both established hubs like Tokyo and emerging locations such as Johor, Malaysia, where hyperscalers seek alternative expansion opportunities.

Key markets driving expansion

• Ashburn, USA: The world’s largest data centre hub will grow by 2,428 MW (58%), backed by £26.7 billion targeting this market. Despite power availability challenges, Northern Virginia remains the principal destination for hyperscalers and colocation providers.

• Phoenix, USA: One of the fastest-growing markets, with a 126% surge (1,109 MW), attracting £12.2 billion in investment. The city’s appeal is fuelled by its scalable land options, business-friendly environment, and strong connectivity infrastructure.

• London, UK: Retaining its status as a leading European data centre market, London is set to expand by 480 MW (36%), with £5.3 billion of investment. However, ongoing power constraints in established submarkets is encouraging development in outer London and secondary UK cities.

• Milan, Italy: The standout European market with a remarkable 168% growth rate (310 MW), requiring £3.4 billion in investment. Milan’s rise is indicative of a broader shift in European data centre expansion towards new, less congested hubs.

• Tokyo, Japan: A key APAC hub, poised for a 25% increase (295 MW) attracting £3.2 billion. Japan’s strategic location, stable power grid, and increasing demand for cloud services continue to drive growth.

• Johor, Malaysia: Emerging as a major data centre hotspot with an 85% growth rate (335 MW), underpinned by £3.7 billion in investment. Johor’s proximity to Singapore, combined with attractive incentives, is establishing it as a viable alternative for hyperscale expansion.

Stephen Beard, Global Head of Data Centres at Knight Frank, explains, “The global data centre industry is undergoing rapid transformation, with hyperscaler and colocation providers prioritising markets that offer access to power, robust connectivity, and a favourable regulatory environment. We’re increasingly seeing sustainability considerations shaping investment strategies, with an increasing focus on renewable energy adoption and energy-efficient design.

“Real estate investors and developers are positioning themselves to capitalise on this demand, with an emphasis on acquiring strategically located land and securing long-term power agreements.

“As global capital races to capture the next wave of digital infrastructure growth, the competition for prime development sites, particularly in power-constrained locations, will intensify. Industry stakeholders must navigate regulatory complexities, power availability concerns, and sustainability requirements to remain competitive in this high-growth sector.

“Operators, investors, policymakers, and partners, each have a role to play in shaping this future. The task ahead is to build infrastructure that not only supports innovation, but also safeguards sustainability, security, and equity.”

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