Global data centres optimistic on AI growth despite power concerns

Research conducted by DLA Piper indicates that the global data centre market remains optimistic about AI-driven growth despite concerns over energy supply.

The study reveals that 70% of data centre investors and operators anticipate increased investment in the next two years. This is driven by the rising demand for data centres, especially through advances in artificial intelligence applications like machine learning and natural language processing.

A significant 98% of respondents are worried about the availability and reliability of power supplies when deciding on data centre projects. Half of those surveyed identified power supply stability as a major barrier to investment in the sector.

According to an analysis by TMT Finance for DLA Piper, the global data centre market is projected to grow at approximately a 10% compound annual growth rate over the next five years, increasing from an estimated valuation of USD 300 billion in 2024 to USD 483.15 billion by 2029.

The report points to notable activities in the Asia-Pacific region, where countries like Japan, South Korea, Australia, and Singapore are leading in the early-stage development of larger data centre projects. Southeast Asia is also witnessing distinct growth patterns, with each market advancing at its unique pace and scale.

Sustainability concerns related to energy and water usage in data centres are also expected to rise. About 70% of respondents foresee enhanced scrutiny and due diligence in this area over the next two years.

Susheela Rivers, Head of Real Estate, Asia Pacific, and Office Managing Partner of DLA Piper's Hong Kong office, noted, "We have seen a shift towards building data centres in less traditional locations due to power constraints in major cities. Investors are interested in 'powered shell' developments, which offer infrastructure without IT hardware, providing flexibility and scalability. Despite the challenges, Asia's data centre industry is at a pivotal moment, with increasing investments in cutting-edge technologies and a strong focus on ESG practices."

Lauren Hurcombe, Hong Kong-based IPT Partner and Global Co-Chair of DLA Piper's Technology & Sourcing Group, commented, "The report underscores the critical role AI is playing in reshaping the data centre landscape. In Asia, we are witnessing a surge in demand for data centres capable of supporting AI-driven applications, driving investment and innovation in the region. Opinions on future data centre locations vary, with AI's reduced sensitivity to latency allowing for flexible site selection."

TMT Finance conducted the survey on behalf of DLA Piper, which involved 176 senior executives across the data centre investment ecosystem, covering topics such as data centre investment opportunities and trends like access to power and AI impact. The survey's findings showed that 81.66% of respondents regard power supply issues as "very prevalent" in their decision-making process for data centre projects, while another 16.57% consider it "prevalent."

The diverse participant base consisted of 34% from advisory and consultancy roles, 25% from debt providers and investment banking sectors, 18% from infrastructure investment and private equity, and 23% from data centre operators and telecommunications.

The survey also highlights respondents' geographical focus, with 51% primarily active in Europe, 33% in North America, 23% in the Asia-Pacific region, 15% focusing on the Middle East and Africa, and 11% predominantly operating in South America.