Tom Glover, Head of Data Centre Transactions at JLL, tells us that with the surge in data volumes and the rise of new technologies, the need for strategically positioned data centres will keep growing.
The data centre market is experiencing explosive growth, fuelled by an almost insatiable demand for cloud computing, AI and other data-intensive technologies. This surge is creating ample opportunities within the sector, but there remains a significant challenge: finding enough suitable land for new data centres.
JLL’s Global Data Centre Outlook 2025 forecasts a phenomenal pace of growth for the sector, projecting a 15% compound annual growth rate (CAGR) through 2027, with the potential to reach 20%. This translates to a considerable global data centre market expansion driven by ongoing and planned developments.
The supply of appropriate locations to build further developments is struggling to keep up with demand, with constraints around power availability, fibre connectivity and skilled workforces further intensifying the pressure. These centres are critical to technological infrastructure, and so a failure to find locations for new sites risks limiting further growth and development in areas such as AI.
The capital barrier to entry in the data centre market is substantial, and land values fluctuate dramatically depending on location. As the JLL report highlights, approximately US$170 billion in data centre asset value will require construction lending or permanent financing in 2025, underscoring the significant capital investment involved. Deploying billions of dollars on a 100MW data centre demands a certainty of success, and land acquisition is paramount to that equation. So, what constitutes a ‘good’ location?
The answer hinges on the type of data centre and its intended purpose. Let’s consider two key categories: AI training facilities and cloud/inference data centres.
AI training facilities
AI training facilities represent the cutting edge of computational power, demanding massive resources. These facilities house specialised hardware like GPUs and TPUs, which consume vast amounts of energy and generate significant heat. For these facilities, key location characteristics include:
- Access to power: These facilities can require 200MW, 500MW, or even upwards of 1GW. This level of power consumption needs proximity to robust power grids and potentially even dedicated power generation infrastructure.
- Extensive land area: A minimum of 200 acres is typically required to accommodate the sheer scale of these facilities, including the physical footprint of the data halls, power infrastructure and cooling systems. This also allows for future expansion and redundancy. The clustering phenomenon is leading to power delivery bottlenecks in major markets, making large land availability in less congested areas even more critical.
- Price sensitivity: While cost is always a factor, access to sufficient power and land trumps price sensitivity for these facilities. Clients are often willing to pay a premium, sometimes up to 20% above the next highest value location, to secure the necessary resources.
Cloud/Inference Data Centres: Balancing scale and cost
Cloud and inference data centres operate on a slightly smaller scale. Their location requirements differ accordingly:
- Moderate land area: 10, 20, or 30 acres are generally sufficient, although more is always welcome. Flexibility is key here, as phased deployments are common. Edge data centres, designed to bring computation closer to the end-user, are often even smaller.
- Scalable power: A runway of power availability is crucial, starting from 20MW for the initial phase and scaling up to 100MW or more as demand grows. Reliable power infrastructure and redundant connections are essential for ensuring continuous operation. Our report highlights the power transmission challenges delaying data centre developments by up to four years or more, making proximity to existing transmission lines a crucial factor in site selection.
- Higher price sensitivity: Cost considerations play a significant role in these deployments. Investors typically aim for locations offering a balance of resources and affordability, with a price sensitivity threshold of around 50% above the next best alternative.
Navigating the challenges: Time, permits and emerging locations
Securing the right location is not just about finding available land and power. Lengthy timelines for obtaining permits and connecting to power grids can significantly impact project delivery and the ability to bring new capacity online quickly.
Established data centre hubs like Slough, Stockley Park, Hayes and Docklands in the UK will continue to see strong demand. However, the emergence of AI training facilities is bound to drive interest in new locations with access to abundant land and power, such as Scotland, Blythe, Leeds and Newport.
The UK government’s recent announcement of the first AI Growth Zones – designated areas designed to expedite planning approvals for data centres – directly address key challenges hindering the rapid expansion of these facilities. Initiatives such as this are a welcome step in a market currently constrained by limited capacity.
Conclusion
As data volumes continue to explode and new technologies emerge, the demand for strategically located data centres will only intensify. The ability to secure land in areas with abundant power, robust connectivity and a supportive regulatory environment will be paramount to success. Emerging trends like edge computing will further shape location strategies, requiring a holistic approach that considers not only cost and availability but also environmental impact and long-term viability. JLL is actively engaged in helping clients navigate these complex challenges and identify strategic locations. In this dynamic market, securing the right land in the right location is not just an advantage – it’s a necessity for thriving in the data-driven future.
