Big data comes to town

More space is increasingly required for data processing centres – as well as more and more electricity. According to Cushman & Wakefield’s ‘2023 Global Data Center Market Comparison’ report, last year their total energy consumption came to 7.4 GW worldwide, a significant increase on the 4.9 GW they required in 2022. The biggest data centre markets in Europe have been given the acronym FLAP-D (Frankfurt, London, Amsterdam, Paris and Dublin). “The data centre market has become highly concentrated and it’s now hitting barriers in the way of its expansion in the form of access to electricity and new plots. There’s still a lot of demand in the FLAP-D markets for data centres, but it’s becoming harder and more expensive to build them in those locations,” explains Piotr Kowalski, the head of Innovation at Beyond.pl, which operates two data centres in Poznań.

According to market analysts PMR, the cumulative power used by Polish data centres came to 120 MW in 2022, which is not much. According to PMR’s forecasts, which take into account the planned projects of those who operate in Poland as well as those who are planning to come here, the total power capacity of Polish data centres is set to rise to 500 MW by 2030. “Poland has had a data centre sector since the early 2000s, but we’ve seen a significant increase in the pace of its development over the last four years,” says Agnieszka Jankowska, an associate director for advisory and transactions at CBRE. “During the pandemic, the market grew significantly as a result of remote and hybrid work as well as the need for companies to have the latest IT infrastructure. Currently, we have also been seeing high demand – and another factor that is speeding up the development of these centres is artificial intelligence,” she reveals. She also emphasises that Poland is a good market because it has not yet been saturated by the competition, unlike more developed countries. “This country could be the next market once the opportunities in the more mature FLAP markets have been exhausted. There’s even a chance that Warsaw could be the first choice for new data centres in Central Europe. We have the people in Poland with the requisite abilities to provide the highest level of service and to build the highest quality buildings. And we still have relatively low construction costs when compared to neighbouring countries and our labour costs are also lower including for specialists. Moreover, the land here is cheap,” she adds.

Warsaw the main focus

Agnieszka Jankowska also makes the point that up until now hyperscale data centres have been mostly concentrated around Warsaw. According to figures provided by research tool Data Center Map, in 2021 Poland had 33 data centres, but now there are 45, 16 of which are in the Warsaw area. One of the largest is Vantage’s 48 MW centre in the city’s Bielany district. European investor and data centre operator Data4 is also currently developing a hub in Jawczyce just outside Warsaw, where four buildings with a total capacity of 60 MW are planned. “We plan to have invested EUR 500 mln in Poland by 2029. Our first centre in Jawczyce is to open in May 2023 and we will be finishing our second building in 2024,” reveals Adam Ponichtera, the managing director of Data4. “We are looking for new locations. One natural place of interest is Warsaw, where we are seeing a lot of demand from potential clients. Central Poland is also fast becoming a developing area for data centres,” he adds.

Other regions could also see rapid development in this area. Beyond.pl has been extending the capacities of its DC2 hub in Poznań, which first opened in 2016. The operator has already secured the site and the electricity supply and has a solid development plan. Eventually, a 42 MW centre could be built. “Over the last few years, the data centre market in Poland has mainly been concentrated in the Warsaw area because of the regional clouds of Microsoft and Google,” explains Piotr Kowalski, the head of innovation at Beyond.pl. “Of course, every big city in Poland has data processing centres, but Poznań is one of the top three cities with access to data processing power. The growth of the AI sector is also being driven by the popularity of AI and machine learning. The important thing is that AI applications do not depend on when the data is sent, which gives Polish locations outside Warsaw a lot of scope for growth,” he argues. For this very same reason, plots on the outskirts or just outside cities are becoming very attractive to operators. “Up until now, investors have looked for locations in city centres or close to business districts,” explains Agnieszka Jankowska of CBRE. “Now the deciding factor that dictates whether a data centre can be built is whether it has a high-power connection, which is very difficult to secure in a city’s business centre. Therefore, we think that AI will encourage investors to be more open to developing in locations further away from city centres,” she believes. She also makes the point that AI is still in its early days and that the first data centres to host it in Poland are only at the concept phase. “Nonetheless, all the operators of hyper-scale centres are making preparations and are looking for new locations to serve their customers,” insists Agnieszka Jankowska.

Does Poland have the power?

Adam Ponichtera of Data4 makes the point that to build and run a data centre a power supply of several dozen megawatts is required. “It takes time to secure that, during which the technology could change, such as further developments in AI. Despite this, the prospects for the growth of the data centre business in Poland remains optimistic,” he claims. According to Agnieszka Jankowska, the access to an adequate power supply is the biggest barrier to the growth of the market. “From publicly available information you can estimate to some extent how much the power capacity will grow over the coming years for a given region based on the total investment planned, but this is still far less than what is needed for the development of the data centres that can host AI and also less than can be found in the FLAP markets. When considering new projects in Poland, data centre investors need to look at the power supply possibilities to their buildings,” points out the associate director of CBRE.

It has to be green

And an adequate electricity supply isn’t all that’s required. How it’s generated is also important. “Each operator representing a hyper-scale client has to sign a contract guaranteeing the supply of green energy for their buildings,” explains Agnieszka Jankowska, who also makes the point that since data centres use far more electricity than any other kind of building, green solutions are of the utmost importance. “According to the International Energy Agency, data centres currently use up 1 to 1.5 pct of the world’s electricity supply. And the forecasts are that this will rise to 8 pct by 2030,” admits Piotr Kowalski. “Electricity is therefore a crucial question when talking about data centres and another key question is decarbonisation,” he adds. He goes on to tell us how operators are striving to ensure that even their back-up power supplies come from low-emission sources and for this they are experimenting with biofuels and hydrogen fuel cells, while adding that: “Data centres, especially when we’re talking about high power, could be a way to store energy.”

Adam Ponichtera is of the view that limiting the harm done to the environment is a shared responsibility. “Because we understand the effect we can have and how huge the environmental challenges are, data centre operators, including Data4, are increasingly employing life cycle analyses. This has turned out to be the most thorough assessment method and it allows us to calculate the impact of building and running a data centre,” he explains. Data4’s complex in Jawczyce will be undergoing a BREEAM assessment. “Such certification is a guarantee for us that the building was constructed without resulting in excessive harm to the environment. I think that these two approaches are not mutually exclusive and both are important for sustainable development,” he insists.

According to Piotr Kowalski, PUE (power usage effectiveness) is the most important measurement in the industry, but WUE (water usage effectiveness) is also crucial. “We also need to talk about CUE [carbon usage effectiveness], which measures the carbon footprint of a building and favours locations that are supplied by green sources of energy. However, it has to be said that this figure is not universally accepted as an important indicator in everyday analyses.” He also goes on to mention two more figures: the energy reuse effectiveness and the energy reuse factor, which are used to measure how much heat is recaptured from the servers. When it comes to the legal regulations governing ESG issues, he points to an amendment to the EU’s Energy Effectiveness Directive passed last year, which Poland has to comply with within two years, but he also mentions the self-regulation in the sector. “It’s important to realise that the market today has consolidated to such an extent that the main demand is actually coming from some of the largest companies – such as Microsoft, Google and Amazon Web Services – as well as from global corporations in the manufacturing, retail, e-commerce sectors, together with, of course, those from the world of IT,” he notes. “Such companies have very ambitious environmental commitments and demand the same from their suppliers. This means that, in practice, data centres have to meet the highest requirements to be competitive,” emphasises Piotr Kowalski of Beyond.pl.

Everybody needs good neighbours

He also feels that the way we think about data centres has changed a lot in recent years. “They are slowly starting to be treated as part of larger ecosystems. Among other obligations, the EU’s EED Directive requires centres to recover heat, report on water consumption, and to use renewable energy, thus fitting them into the bigger picture of urban planning. This is a step in the right direction. If we can get data centres to be 100 pct powered by renewable energy and, on top of that, still be able to reuse the heat they generate, then a data centre could function as a modern heating plant or, in other words, a good neighbour,” he claims. Beyond.pl’s office building is currently heated by a heat pump that uses waste heat from the centre’s servers. “We are also working on feeding heat back into the municipal heating supply. In Ireland, Amazon Web Services’ server rooms are connected to municipal networks, while a Microsoft server room in Finland also operates along similar lines – and we are trying to employ these lessons in Poznań,” explains Piotr Kowalski.

Maciej Żuk, an HVAC key account director at Frizo, a company that offers cooling systems for industrial space and data centres, tells us that at the current energy and heating prices, it would prove to be cost-effective for virtually every new facility with IT equipment, regardless of its scale, to use waste heat. “It’s estimated that the server rooms in Warsaw alone require around 100 MW of electricity. Most of this power is transformed into heat and dumped into the atmosphere. Depending on the IT systems that a server room uses, this heat can range from 10 to 60°C. Some of this heat when it is high enough can be used directly for heating, while if the heat is less than this it can be raised to higher usable temperatures with high-efficiency heat pumps,” he explains.

Adam Ponichtera reveals how Data4 is discussing how best to use waste heat for the benefit of local residents. “Data4 and the University of Paris-Saclay Foundation are just about to launch a pilot project in France for the world’s first bio-circular data centre. Various options are currently being explored, such as heating the households near data centres. This experimental project also involves using some of the captured CO2 to grow algae, which is then recycled as biomass for other industries. We will be looking at the lessons learned from the project so that we can take similar steps in future for the Data4 centres in Poland,” he explains.

While a data centre could, at least potentially, benefit the local community in the future, Agnieszka Jankowska points out that the rather long list of requirements for sites for a data centre tends to include not neighbouring any residential development. “Data centres are a novelty, and people are wary about what they don’t know. But in this case, they are quite wrong to feel this way, because living in the vicinity of a data centre is really not a problem. Developers, however, want to have hassle-free projects, so they try to avoid any possible conflicts with local residents. Nevertheless, there are some examples – such as in Jawczyce, where Netia’s data centre and Data4 are located very close to single-family housing – where the relations with the surrounding community are exemplary,” she stresses.

Developers get in on the act

Companies in the warehousing sector are also looking to benefit from the demand for data centres. In Poland, such industrial developers as 7R have been shifting their focus to this sector and are offering to build BTS projects on their land banks with secure electricity connections (that can also meet the needs of hyper-scale facilities), as well as leasing out suitable space in their projects. “The data centre market is also of great interest to developers, both to those that specialise in office and warehouse-industrial space,” explains Agnieszka Jankowska. “This has not yet materialised in any concrete transactions with hyper-scale data centre operators, but hopefully this will change, as such talks are already underway. We are dealing here with a very narrow range of developers. These are mostly companies that have surplus land or plots close to Warsaw, mainly on the western side of the city – and these are areas that data centre operators prefer,” says CBRE’s expert. One example of such a partnership is situated over Poland’s western border. In 2022, P3 announced plans for the spec development of a data centre hub in Hanau in Germany, which will have an impressive capacity of 180 MW. In 2023, Data4 took over its development after considering its original objectives, such as the use of 100 pct renewable energy (50 pct of which is to be locally sourced).

The importance of the sector can be seen not only in the growth in the number of facilities, but also in their scale. “Up until now, 20–40 MW centres seemed huge. Today, facilities are being planned in Europe with capacities of several hundred megawatts; while in the US, projects have been announced with power levels that are already starting to be counted in the gigawatts,” points out Piotr Kowalski. According to the ‘Emerging Trends in Real Estate Global Outlook 2024’ report published by PwC and the Urban Land Institute, the data centre sector is becoming the subject of increasing interest to real estate investors who are also assessing its potential in view of the development of artificial intelligence, and that this underdeveloped alternate sector has the potential to become a leading real estate asset class.