Driven by the ‘Fourth Industrial Revolution’ and the growing influence of AI and IoT, the data centre industry is expanding at an unprecedented pace.
Established players are scaling their operations, while new entrants are moving aggressively to establish a foothold. Surging demand for digital infrastructure continues to fuel investment and intensify competition across the sector. Whether developing a new data centre portfolio or expanding an existing one, keeping pace with escalating demand and intensifying competition remains a considerable challenge for all market players.
In this piece prepared by Fofo Kalfa, Associate, Project Management and Khaleel Abdelrazeq, Associate, Project Management, we outline why strategic site selection and robust due diligence are critical to successful data centre development in the UK and Europe, ensuring resilience, efficiency, and long-term scalability in an increasingly competitive and power-constrained market.
There are critical phases that demand meticulous attention to detail, to enable informed and confident decision-making, while proactively addressing key opportunities and challenges before advancing to the more complex stages of a project.
Early-stage assessments are essential and when overlooked or compromised, can result in the project being delayed in a protracted, pre-acquisition stage. This often leads to difficulties in making confident commercial decisions on land deals, or worse, investing time and resources into land that ultimately proves non-viable.
Site selection serves to optimise the search for land best suited to specific development requirements, be it an AI focused hyperscale facility or a Tier III edge data centre in an urban environment. At the same time, due diligence helps quantify the risks associated with the site, providing a clear strategy for managing red flag risks related to cost and time.
Selecting a piece of land for a data centre development involves much more than just finding a suitable real estate plot, here are some of the key considerations:
Geographical diversification: Latency has always played an important role in site selection,
depending on the end use of the data centre. Proximity to metropolitan areas is often prioritised as they host critical infrastructure, such as fibre networks and data exchange hubs, which ensure faster and more efficient communication between applications. While FLAPD markets (Frankfurt, London, Amsterdam, Paris, and Dublin) continue to experience steady growth, with forecasts indicating an increase of approximately 16% over the coming year, investors are looking toward secondary markets for expansion.
Moving to secondary markets can provide more affordable and available land options, but these locations often require additional infrastructure investment, such as substations and new fibre networks, to ensure connectivity. Despite these challenges, investment in secondary markets is on the rise. Emerging locations, particularly in Southern Europe and the Nordics, are expected to see substantial growth, ranging between 30-55% over the next year.
Early communication with critical stakeholders to build strategic partnerships: Engaging with governmental and regulatory bodies, utility providers, investors, financial institutions and local communities is crucial for securing necessary approvals and establishing long-term, collaborative relationships. Focusing on local economic benefits, such as job creation and educational programmes, can help build community support and may contribute to more efficient planning processes and land agreements.
Location based design requirements and innovative approaches: To effectively meet the needs of developers and end users, a robust design developed in close collaboration with technical teams and informed by location-specific factors is essential. Such designs prioritize critical elements including reliable power, efficient cooling, high-speed connectivity, comprehensive security, and long-term sustainability.
For instance, if the developer’s design specifications include cooling water, the Nordics or Portugal would be more suitable location than Poland. This is because Portugal and the Nordic countries have historically relied on their natural water resources, while Poland, faces more significant water scarcity. However it should be noted that many locations are increasingly investing in infrastructure to address water availability challenges and manage resources sustainably, amid changing climate conditions. Another consideration would be effective use of space, which is essential for future expansion and maintenance. Modular designs can provide the flexibility and scalability when targeting growth. This allows operators to expand without significant upfront costs, aligning investment with demand. For example, in urban environments, like London or Paris, multi-storey data centres optimise land use, increasing capacity within a more compact footprint.
Beyond considering the land and physical assets, reviewing operational procedures and analysing historical failure incident reports to identify potential risks and areas for improvement, is also critical.
These complexities give rise to some key considerations that demand thorough evaluation and strategic decision-making, including:
Permitting/Zoning and building consents: Securing permits for data centre developments involves navigating intricate regulatory landscapes, which are constantly evolving and can significantly impact project timelines and feasibility. For instance, recent amendments to the UK’s National Planning Policy Framework (NPPF) in 2024 introduced the concept of the ‘Greybelt,’ which allows certain developments within Greenbelt areas under specific conditions, potentially easing restrictions for data centres. However, these amendments also added stricter requirements for sustainability assessments and noise impact evaluations, further complicating compliance for such projects.
Complying with these specific conditions involves preparing comprehensive planning applications, detailed environmental impact assessments, and engaging with local authorities and statutory consultees at an early stage. Additional complexities include height restrictions, operational noise limits, and negotiating air quality contributions. It is important to work closely with planning consultants, legal teams, and design experts to identify and assess regulatory risks early in the due diligence phase. By analysing zoning allocations and comparing previous local applications and outcomes, developers can then identify potential obstacles, enabling them to develop effective strategies for securing planning permission.
Power infrastructure: Access to reliable power is one of the most significant challenges in data centre site selection and due diligence. Risks include delays in securing grid connections, limitations in power availability and constraints in cable routing. These factors can derail projects if not identified and assessed early. Even if a power reservation agreement with a Distribution Network Operator (DNO) indicates a clear power-on timeline, unforeseen grid constraints or shifts in regional demand can lead to substantial delays. It is important to work with local power consultants to conduct robust technical due diligence, and to engage with DNOs to assess power availability and connection timelines. By evaluating network constraints and risks, the developer can identify underlying risks early to assist them in making informed decisions about site viability.
Environmental risks: The environmental suitability of a site is pivotal to its feasibility for data centre development. By broadening the scope of land considered, sites with contamination, natural hazards, or flood risks can be evaluated as potential acquisitions. However, not all sites are viable – clear expectations are set at the outset of each project, aligned with the client’s brief. For example, while clients previously assessed flood risk based on 1/30, 1/100, or at most 1/500-year events, we now emphasize reviewing more robust flood models and climate resilience data.
This shift is a response to the increasing frequency of extreme weather events and heightened awareness of climate-related risks across the sector. A comprehensive environmental due diligence process typically involves desk-based reviews and site inspections, as well as engaging with environmental consultants to assess risks such as contamination, biodiversity, and water management.
Sites impacted by contamination or other hazards may require costly remediation measures, which must be factored into site feasibility analysis and programme planning. Additionally, regulatory requirements concerning biodiversity net gain and water management are becoming more stringent, with local authorities demanding clear evidence that developments will enhance, rather than degrade, environmental quality. As such, it is essential to engage environmental consultants and other specialists early in the process to inform site selection and to develop mitigation strategies.
Below, we explore some of the key opportunities that arise from a well-executed site selection process:
Enhanced connectivity: Proximity to major network hubs and robust fibre optic infrastructure ensures low latency and high-speed data transfer which is crucial for reliability and performance.
Energy efficiency: The global energy situation is still complicated, with many countries facing limited grid capacity and needing to upgrade their infrastructure. Choosing sites that already have access to renewable energy – like wind, solar, or hydro power – can help lower running costs and cut carbon emissions. For example, the Netherlands has great renewable energy options, and the UK has a wide network of wind farms.
Cooling efficiency: Cooler climates in northern Europe, such as Sweden and Finland, naturally reduce cooling costs. Moreover, innovative cooling technologies like seawater cooling in Portugal can enhance efficiency.
Sustainability and future-proofing: A rigorous site selection process helps mitigate risks from natural disasters such as flooding and earthquakes by identifying safer locations, ensuring long-term operational resilience. Additionally, thorough due diligence allows organisations to align site selection with sustainability objectives by assessing environmental impact, renewable energy availability, and water efficiency.
Scalability: Identifying locations with expansion potential enables data centre investors to scale operations and adapt to the sector’s rapidly growing demands. Emerging secondary markets such as Madrid, Berlin, and Warsaw are becoming increasingly attractive for scalable developments.
Regulatory incentives, cost optimisation and competitive advantage: Countries like Spain, Portugal, and Italy offer tax incentives and lower land costs to attract data centre investment, while the Nordics provide access to abundant, low-cost renewable energy. Ireland and Denmark stand out for their streamlined permitting processes and supportive regulatory frameworks, which can significantly reduce project timelines. These factors contribute to faster development and lower operational costs. A thorough site selection process evaluates these advantages alongside infrastructure availability, connectivity, and climate risk, ensuring that locations align with long-term profitability and resilience strategies.
Community impact: A strategic site selection process considers the impact on local communities, ensuring sustainable development and positive relations. This eventually leads to better support and cooperation from local stakeholders and authorities which are key players in the process.
Strategic site selection and thorough due diligence are critical drivers of successful data centre development, underpinning operational resilience, cost-effectiveness, and long-term growth. By proactively addressing regulatory requirements, securing dependable power and connectivity, and managing environmental considerations, organisations can maximise their return on investment while supporting sustainability goals.
In a rapidly evolving digital landscape shaped by technological innovation and growing demand, taking a forward-looking, data-informed approach to site selection empowers developers to navigate risks, seize emerging opportunities, and sustain a competitive advantage in this dynamic industry.
