DWS: Investment success in the data centre market relies on more than just capital

October 23, 2025

_{This article was originally written in Dutch. This is an English translation.}

For years, the European data centre market was locked down due to a lack of capital, fragmented markets and an abundance of regulations. But now, data centres are rapidly emerging as the beating heart of the European economy. Artificial intelligence, cloud services and national digital ambitions are giving the sector wings.

By Arjen Jonk, Head of the Netherlands and Belgium, DWS

Europe is working on a large-scale renewal of its infrastructure. This opens doors for institutional investors. By making the right choices and entering into the right partnerships, the continent can develop into one of the most important markets for digital infrastructure over the next ten years.

Governments and the European Commission are placing digital infrastructure high on the agenda, supported by political backing, funding and industrial policy. France and Germany have launched extensive programmes that are driving the growth of artificial intelligence and cloud services.

Computing power and supercomputing are no longer a luxury, but are indispensable for applications such as self-driving cars, biotechnology and national security. Europe is linking policy to financial clout. Opportunities are emerging for investors that are based on public support, strong local demand and predictable returns.

But Brussels is not sitting still. New EU regulations require data centres to report their energy and water consumption. Germany is also imposing stricter requirements on the reuse of residual heat in new buildings. These measures are in line with the broader sustainability agenda, which focuses on transparency and reporting. National regulators are adopting these standards, giving investors an increasingly clear picture of the sustainability of their investments. In practice, policy is becoming increasingly concrete.

The AI acceleration

The breakthrough of artificial intelligence has radically changed the function of data centres. They are no longer grey warehouses full of servers, but energy-intensive power stations where the most advanced models run day and night. Major European economies are seizing this moment to make their digital independence ambitions a reality. France and Germany are positioning themselves as home to computing factories with a capacity of more than 1 gigawatt, which until recently was unthinkable in Europe. This is no longer a pipe dream: it is happening now, driven by national strategy, geopolitical interests and the race to become a leader in artificial intelligence. Not only computing power, but also fibre optics, energy security and cooling determine long-term competitiveness.

Bumps in the road

The European power grid, already heavily burdened by the energy transition, is creaking at the seams. In many regions, capacity is exhausted. In the Netherlands, data centre builders sometimes wait ten years for a connection.

In April, the Iberian Peninsula suffered a massive power outage that lasted a whole day: a painful lesson that even modern grids are vulnerable to peak loads. Nevertheless, development is not standing still there either: new data centres are springing up at a rapid pace in Madrid.

A data centre without electricity is nothing more than an empty box. Grid congestion is therefore a serious investment risk that must be taken into account. The power supply determines where construction can take place, when projects can get off the ground and what returns can be achieved in the short term. Investors must therefore consider energy security: investing in solar and wind farms next to a data centre, energy storage on site and negotiating flexible contracts. Such investments are not a luxury, but a pure necessity.

Local politics and international capital

The power grid is not the only obstacle. Data centres are politically sensitive in many countries, especially when it comes to hyperscales. In the Netherlands, plans have been halted or zoning plans tightened due to stricter spatial planning rules and capacity ceilings. In rural areas, residents are opposed to the degradation of the landscape, the enormous water consumption or the idea that foreign tech giants would seize large amounts of land and resources. The objections are understandable and deserve our serious attention.

This makes it clear that digital infrastructure is no longer invisible, but part of the public domain. Anyone hoping to obtain a licence must be able to demonstrate that projects add value to the local economy: feeding back residual heat, creating jobs or supplying green energy. Simply investing capital is no longer enough: involvement in the local community, sustainable design and knowledge of the rules are indispensable.

Where are the opportunities?

Spain is rapidly developing into a hotspot. The country has plenty of land, hours of sunshine and submarine cables. From Madrid, Barcelona and Málaga, data traffic can flow to Southern Europe, Latin America and Africa. New international cable connections, such as those between Naples and Barcelona or Marseille and Algiers, make Spain an important hub. Investors must, however, take into account strict requirements regarding energy security and backup facilities.

The Netherlands remains an attractive location due to its excellent digital connections and expertise. However, growth here is hampered by network congestion and spatial constraints. Expanding or modernising existing data centres often yields a faster return than new construction. Regulations are in flux in both Spain and the Netherlands, making it essential to consult with the government and other stakeholders at an early stage.

At the same time, Italy, Portugal and the Nordics are gaining momentum. Green energy, financial incentives and lower land prices are attracting both operators and investors. In the Nordics, hydropower and wind energy are also widely available, and the cool climate reduces cooling costs. Europe may not have a Silicon Valley, but it offers long-term investors something more valuable: diverse markets with specific opportunities and policy measures that are increasingly well aligned.

The race to the top

The race to the top of the data centre market is on. In the US, the power supply is under enormous pressure due to the energy consumption of data centres that provide computing power for AI and crypto platforms. Europe is lagging behind, but has the capacity to get ahead of digital developments. If it manages to expand its power supply, maintain the pace of licensing and promote public-private partnerships, Europe could become one of the world's most important regions for investment in digital infrastructure.

The data centre market rests on solid investment pillars: scarcity and policymakers who are increasingly recognising the need for additional capacity. But capital alone is not enough. Investment success requires foresight, flexibility and a willingness to adapt to a rapidly changing European political and social climate.

Data centres are no longer seen as soulless blocks full of endless racks of servers with flashing lights. They are the cornerstone of the new digital economy. This is not a pipe dream, but a European reality.