That stands for Frankfurt, London, Amsterdam, Paris and Dublin. Thanks to high levels of connectivity, availability of skilled labour, and established infrastructure, they have been the go-to locations for data centre construction for some time.

But it鈥檚 getting harder and more costly to build in those locations, as a result of regulatory demands, environmental curbs, and high energy costs.

Dublin has suspended new data centre approvals, while Frankfurt still relies heavily on fossil fuels for its energy generation. Meanwhile, wage pressures in areas like London and Frankfurt amid a shortage of skilled workers are increasing costs and lengthening project timelines.

Nonetheless, demand for data centres remains high, amid the march of artificial intelligence (AI).

Richard Battey is a director of global construction and cost management consultants Currie & Brown, and head of data centres for UK and Europe. 鈥淭here鈥檚 still a drive to go into the FLAP-D regions but there are big restrictions in terms of power availability in the likes of Frankfurt and Dublin. If you haven鈥檛 got the permits in place now for data centres, then there are restrictions on where you can build,鈥� he says.

So where else in Europe could see a surge in data centre construction?

Milan rising

Richard Battey, director and head of data centre UK and Europe, Currie & Brown

According to Battey, Milan is one of the most attractive alternatives for data centre investment. 鈥淚t鈥檚 geographically well positioned in southern Europe and acts as a connection point between major markets like Germany, France and Switzerland,鈥� he says. 鈥淭here鈥檚 a growing digital economy in Italy, especially post-pandemic, and Milan sees the highest concentration of demand for digital services.鈥�

The city鈥檚 connectivity credentials are strengthened by its hosting of the Milan Internet Exchange (MIX), one of the largest of its kind in Italy. Meanwhile, Lombardy, the region in which Milan sits, generates 11,000 GWh of hydroelectric power and 1,500 GWh of solar energy annually. That makes compliance with the European Union鈥檚 environmental benchmarks less onerous than in other regions where data centre operators face potential regulatory penalties if they fail to cut carbon emissions or water use, according to a recent Currie & Brown report, .

Milan has already attracted attention from hyperscale operators like AWS, Google and Microsoft, along with colocation providers. And crucially, Milan still offers relatively affordable labour costs compared with the more mature FLAP-D markets. Wage inflation is expected to sit at 2% in Italy in 2025, as compared to 4.6% forecast for the Euro area as a whole, according to Eurostat.

The Italian government鈥檚 commitment to digital infrastructure has also helped, Battey notes. 鈥淭he National Recovery and Resilience Plan (NRRP) includes major investment in digitalisation, plus tax incentives and streamlined permitting processes. There鈥檚 also funding support for youth and tech initiatives, which includes data centre developments.鈥�

Beyond Milan

Milan may be attracting the lion鈥檚 share of attention, but it鈥檚 not alone. Madrid in Spain is also proving fertile ground for new construction. 鈥淭here鈥檚 a lot going on there right now,鈥� Battey says. Currie & Brown is actively working on several projects just outside the Spanish capital, supporting hyperscale clients with both cost and project management, he adds.

Meanwhile, Poland shows promise but remains affected by proximity to the war in Ukraine, which has made some investors cautious. Elsewhere, Portugal has seen pockets of interest, and Switzerland continues to host steady activity 鈥� although with relatively high development costs.

Sustainability: front of mind

As data centre demand grows, so too does scrutiny over how these energy-hungry facilities are powered and built. Sustainability is no longer a 鈥渘ice-to-have鈥� but a requirement for operators and clients alike.

Image: vladimircaribb via AdobeStock - stock.adobe.com

鈥淭here鈥檚 heavy investment right now into renewable energy sources - solar, wind, hydro - to power data centres,鈥� says Battey. 鈥淚t鈥檚 about aligning with the global drive toward energy efficiency and carbon neutrality.鈥� Operators are increasingly seeking access to green power in their site selection, with Italy鈥檚 expanding renewable grid providing a helpful tailwind.

On the construction side, Battey points to the use of carbon-neutral strategies, including carbon capture, as well as greener building materials and more efficient cooling systems. 鈥淐ooling tech is evolving fast. At events like Data Center Dynamics, everyone was talking about liquid immersion cooling,鈥� he says. 鈥淭here was also Microsoft鈥檚 underwater data centre project [Project Natick] a few years back. It didn鈥檛 take off widely, but these ideas continue to get explored.鈥�

Another possible solution being mooted, particularly in North America, is the use of small modular reactors (SMRs) - compact nuclear units - to co-locate with data centres. 鈥淚t鈥檚 generating a lot of interest,鈥� Battey says. 鈥淎WS has been looking into it in the US. There are conversations about it in the UK too, but the challenge is the security and regulatory hurdles that come with nuclear tech. There鈥檚 promise there, but it鈥檚 not imminent.鈥�

Construction trends: speed and complexity

People may assume that data centres may be functionally 鈥渂ig boxes full of pipes and wires鈥�, as Battey puts it, but delivering them is anything but simple, he points out. The speed to market is paramount, and the scale of the builds 鈥� particularly for hyperscale clients 鈥� presents a unique challenge.

While civil, structural and architectural elements are relatively straightforward, Battey notes that the mechanical, electrical and plumbing (MEP) components are what really drive complexity. 鈥淐ompared to an office building, you鈥檙e dealing with far more specialised kit, which is why you need specialist cost and programme managers in place.鈥�

Cloudy outlook?

Despite the challenges, Battey doesn鈥檛 see demand for new facilities dropping any time soon. 鈥淲e鈥檙e seeing exponential growth driven by AI and digital consumption. While the market plateaued a bit a few years back, it鈥檚 ramped up again. Projections for the next four to five years still show strong growth.鈥�

But he鈥檚 also watching geopolitical developments with concern 鈥� particularly the prospect of trade tariffs and material price volatility. 鈥淭here鈥檚 a bit of a storm brewing,鈥� he warns. 鈥淭hings like trade tariffs could impact construction material costs and disrupt supply chains. It鈥檚 a buoyant market right now, but those headwinds could slow things down.鈥�

For now, data centre work remains a fast-growing segment for contractors across Europe. But site selection, energy access, and sustainable construction practices are rapidly becoming the new battlegrounds.