Europe’s Data Center Market on the Rise: Colocation Booms with Cloud, AI, and Sustainability

The global colocation data center market is experiencing massive growth – and Europe is emerging as one of its key drivers. According to a recent analysis by DC Market Insights, the global market volume is expected to reach around USD 332 billion by 2035, up from approximately USD 31.9 billion in 2020 — a compound annual growth rate of more than 16 percent.

Demand is being fueled primarily by the rapid expansion of cloud services, artificial intelligence (AI), the Internet of Things (IoT), and 5G networks. Around the world, companies are increasingly outsourcing their IT infrastructure to specialized providers to reduce capital costs and gain access to highly secure, interconnected environments.

Europe as a pillar of stability in the global colocation boom

While North America still leads in overall capacity, Europe is considered a particularly dynamic and stable market. Key reasons include the EU’s strict data protection rules (General Data Protection Regulation, GDPR), political support for sustainable energy supply, and the growing number of companies modernizing their IT infrastructure.

The established FLAP markets (Frankfurt, London, Amsterdam, Paris) remain the backbone of Europe’s colocation landscape. At the same time, new regional hubs are emerging in Madrid, Warsaw, Stockholm, and Dublin, driven by cloud expansion, regional data processing, and energy-efficient new builds.

According to industry analyses, including data from CBRE and Arizton Advisors, Europe is on track to reach a record level of data center construction capacity by 2025. Frankfurt in particular is developing into one of Europe’s most important cloud and hyperscale hubs.

Sustainability as a competitive advantage

A key factor in Europe’s competitiveness is the energy transition in the data center sector. Operators are investing in renewable energy sources, liquid cooling, and energy recovery systems to meet the high energy demands of AI and HPC (High Performance Computing) workloads.

In many countries, government incentive programs support infrastructure modernization — for example, through tax benefits for energy-efficient new builds or requirements for CO₂ transparency. This gives Europe an advantage over markets such as the U.S. or Asia, where sustainability regulations are often less strictly enforced.

New data centers in Germany

Several major data center projects are currently underway in Germany. In the Frankfurt region, operator Colt Data Centre Services is planning four new facilities — two in Frankfurt with a total of about 63 MW of IT capacity on roughly 7.3 hectares, and two in Berlin with about 54 MW on 3.8 hectares. Another major project: VIRTUS Data Centres is developing a mega-campus in Wustermark (Brandenburg, near Berlin) with approximately 300 MW of IT capacity in planning. European provider AtlasEdge also opened a new site (“STR001”) in July 2025 in Stuttgart (Baden-Württemberg) with around 20 MW of power and 10,000 m² of space — the first phase of a larger campus development.

Strategic importance for enterprises

The colocation model is fundamentally changing the capital structure of IT infrastructure. Companies can shift from capital expenditures (CapEx) to operational expenditures (OpEx), enabling flexible scaling, shorter innovation cycles, and easier integration of cloud and edge services.

In particular, telecom operators, financial institutions, and industrial enterprises are using colocation data centers to build hybrid IT models that combine private cloud environments with public cloud providers and local edge nodes for low latency.

Outlook: Edge computing and emerging markets

With the rollout of 5G networks, the importance of edge colocation sites is increasing. These smaller facilities are operated closer to end users to enable real-time processing for data-intensive applications — such as autonomous vehicles and industrial automation.

At the same time, the integration of Eastern European markets and the development of new hubs in Southern Europe and Scandinavia are creating additional growth opportunities. According to DC Market Insights, Europe remains an attractive destination for investors thanks to its regulatory stability and energy efficiency.

Europe benefits in the global colocation competition from clear regulations, sustainable energy policy, and strong cloud demand. Despite rising energy costs and limited space, European locations remain attractive for international providers. The combination of data protection, energy efficiency, and digitalization makes the continent a key market for the data centers of the future.

Summary (tl;dr)

• The global colocation market will grow to around USD 332 billion by 2035 (CAGR 16%).
• Europe benefits from data protection, sustainability, and cloud adoption.
• FLAP markets remain central, while new hubs emerge in Southern and Eastern Europe.
• Sustainable technologies and energy efficiency provide a competitive edge.
• Edge computing will become the next growth driver for Europe’s colocation infrastructure.