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Data Centres: Life outside London

London has traditionally been at the forefront of data centre site selection. But just as in recent years cities outside Frankfurt, London, Amsterdam, Paris, and Dublin (FLAP-D) are increasingly being seen as viable choices for data centre locations, so too cities and regions elsewhere in the UK are starting to demonstrate their credentials as alternative data centre locations.

Plans to upgrade grid capacity to alleviate energy availability issues in London is an important element but the demand for data centres means that developers cannot wait for these improvements to be in place.

London does remain a viable choice for data centre development, particularly around opportunities for refurbishment and retrofit of existing facilities. But as power availability becomes an ever more limiting factor, we are increasingly supporting clients in exploring options beyond London and the M4 corridor.

The availability and cost of land

As concerns about power availability in London have grown, viable sites have seen a significant rise in cost. Savills is reporting costs of up to £17 million per acre in London. Business cases for this level of CapEx are challenging and are leading developers to investigate other UK regions.

Additionally, although AI is driving the significant increase in demand for data centres, its reduced latency sensitivity compared to fintech is supporting the case for looking beyond London.

Power availability: the legacy of the industrial north

The industrial revolution reshaped Britain, creating a footprint of heavy industry in northern towns and cities. From shipbuilding to steel manufacturing, these industries themselves may be in decline, but their legacy is a power capacity in the grid that surpasses current needs.

Whilst London struggles with overdemand on the grid, areas around Hull, Manchester, Sheffield, enjoy a relative abundance of power. This can and will be further fuelled by the integration of major renewable projects such as Dogger Bank.

Opportunities for renewable integration into off grid networks

A significant trend we are seeing is the exploration of sites for renewable energy installations co-located with data centres. One example is Google’s partnership with Fervo to supply geothermal energy into the local grid that serves its data centres in Nevada. Developing their own sustainable power generation is an opportunity for data centres to not only secure power at a forecastable cost but to also comply with environmental regulations.

In the UK the choice of off-grid renewable connections depends on location, with wind and hydroelectric presenting most promise for sites in the north and Scotland.

An added attraction is the potential for these off-grid renewable power sources to become revenue generating. Thanks to the need for data centres to allow for significant power overproduction to negate risks of downtime there is potential for excess power to be sold to the grid.

One major barrier is battery storage but advances are being made, Microsoft’s use of battery storage as a replacement for diesel-powered back up for sites in Sweden came online last year. Current battery solutions still have viability challenges either in terms of the sustainability of their manufacture or their performance. But as demand fuels research and development, innovation in this area is growing with Google and other key players announcing plans to explore large-scale battery storage to harness renewable power.

Other areas of innovation are making significant strides too, small modular reactors are becoming a more mainstream solution for supplying off grid power. And building links to other, more traditional, industries such as harnessing data centre heat generation for use in agriculture are becoming viable possibilities.

Legislation driving data centre site selection

Levelling up has for some years now been a catch-all term for enhancing opportunities outside London. With the UK election due this year, there may yet be an even more concerted push to improve investment outside the capital.

Already policy and regulation such as the CSRD requirements, enhanced ISO standards and net zero regulations are forcing data centres to examine their energy mix and seek to enhance their integration of renewables. Choosing locations outside London, where land availability allows for potential co-located renewable energy generation opportunities can support this.

Innovation such as district heating also have the potential to contribute to both regulation compliance but support planning applications and securing social licence to operate from residents and other businesses.

Staff recruitment and retention

Construction of data centres outside London has an immediate impact on job creation in the region. The challenge comes in retaining those jobs once the centre is operational.

Proximity to a data centre could have a positive impact on related industries such as software development but it could also be used to attract interest from seemingly unrelated industries which might be able to benefit from co-located off-grid power or even harness the heat production of the centre. Benefits which could also attract housebuilding and support recruitment and retention of current and new workers keen to take advantage of a lower cost of living outside the capital.

Beyond the London box

Data centre design is one of the most dynamic and exciting challenges in our industry. The growth of demand and speed of innovation has the potential to have a significant impact on the UK’s energy transition and the future of the country’s regional economies. Exploring the potential of sites outside London is going to play a key role in the future of data centres. As regulations shape the industry, owners and operators will need trusted partners to help guide real estate strategy decisions.

With UK-wide and global experience in real estate site selection and current data centre evaluation, we are ready to support your next project, wherever it might be.

Let’s talk

Jonathan Clark

Data Centre Sustainability Lead

Array