Boardroom Briefings: the rise of data centres

While scrolling through the 10,000 photos and 1,500 videos on my phone, I reflected on the fact that we easily overlook all the data powering of our devices, which needs to be stored somewhere physical. Enter the data centre, a hyper-scale facility specialising in scalable data storage, distribution and handling.  

In September 2024, the UK government recognised the ever-increasing requirements and announced that data centres are now classified as critical national infrastructure (CNI). This is the first time a new category has been added to the CNI regime since space and defence was added in 2015.  

Adding data centres will help improve coordination with the government to combat cyber criminals in deterring hacks on highly sensitive information such as vital health and financial data. It’s also a crucial part of the government's push for economic growth. 

Demand for data centres  

We expect to see an all-time high in the supply of data centres in 2025. The increasing demand for AI, along with a shift towards home working and the massive growth of cloud computing and web-based software are major driving forces for this demand of data centres due to the exponential rise in requirement for space, security and disaster recovery. 

Older data centres can't keep up with the capacity and power density needed by today’s startups, adding even more pressure for new facilities. Up until 2023, growth in the data centre sector has been modest at 1.5% annually over the last 20 years, but things are expected to ramp up significantly through to 2040. The COVID-19 pandemic has accelerated this trend; experts say a growth rate 4.1% will be required to meet the demand over the next 15 years. 

Location, location, location 

In the past, data centre locations were all about being close to financial markets and fibre connections. But now, it’s more about power availability and how quickly a site can be made operational. This shift means regions across the UK, not just London and the South East, are becoming attractive spots for new data centres.

Challenges and opportunities 

Planning 

New laws and policies on energy consumption and sustainability, along with rising construction costs, could limit future supply. The planning system is still very much in its infancy stage for the data centre sector, creating a bottleneck. But there is hope that classifying data centres as CNI will streamline the process. 

Deputy Prime Minister, Angela Rayner, went a step further to reinforce this message by going on record to say she’ll be involved in local planning decisions that bring significant economic benefits and investment to the UK. She stepped in as recently as December 2024, to overturn a planning application determination for plans of a 65,000 square meter Data Centre proposal in Ives, Buckinghamshire. 

Growing investor and consumer awareness in sustainability had led to market leaders like Google tackling concerns head-on by using wind power and running their data centres on green energy; with the potential to use and sell the excess heat generated by data centres to local networks and neighbouring homes.  

Repurposing 

As demand grows, assets originally set aside for industrial and logistics purposes is now being used by data centre operators. These structures are deemed perfect for repurposing due to their large footprints, high ceilings and sturdy structures that can handle the weight and space requirements of data centre equipment. Plus, they often have easy access to power and water needed for cooling systems. Repurposing these sites can be cheaper than starting from scratch on new land. 

Big investments ahead 

Some of the big players in the market have been conscious of all the signs, with Amazon announcing plans to invest £8 billion in the UK over the next five years to build and operate data centres.  

In summary, with technical advancements continuing to shape the real estate industry, growing demand, changing location dynamics and huge investments on the horizon, data centres are set to play an even bigger role in our digital and economic future.

Ogier Global's Real Estate Services team 

At Ogier, our agility and adaptability are key strengths that allow us to support clients to navigate the ever-evolving trends they may encounter. Our corporate and fiduciary services division boasts a dedicated team of professionals specialising in the setup, administration and management of real estate holding structures as well as working alongside Ogier's other service divisions, to provide practical legal advice and consulting. With experience working on the largest and most complex real estate transactions in the UK and Europe, we work closely with our legal real estate team to provide a fully integrated service offering. 

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Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

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