A guest article by Marco Mendes, COO of the Logivest Group
Amazon is planning to invest several billion euros in data centres in Germany over the next few years. And this is not an isolated case, as advancing digitalisation is also increasing the demand for IT infrastructure.
More and more cloud providers are investing in huge hyperscale data centres. However, smaller variants such as colocation data centres that rent out server room capacity, edge data centres to cover local requirements or corporate data centres that house the IT infrastructure of corporations are also expanding their capacities. In doing so, they are entering into direct competition with logistics as space seekers.
Space availability and infrastructural requirements
Especially in urban regions and conurbations, large-volume open spaces for logistics use are in short supply. Demand has outstripped supply for years, and local authorities are usually reluctant to take on new developments. With the data centre boom, a competitor is now entering the market whose location criteria correspond in many respects to those of a logistics location.
Hyperscalers in particular require large, contiguous plots of land of around four hectares or more. Due to the size of the site and the good infrastructure, former production sites are also interesting for data centres. The competition therefore relates not only to greenfield sites, but also to brownfield sites.
However, the most important location criterion for a data centre is a reliable power supply, which is also essential for highly automated logistics centres. Power grids and prices as well as the shortest possible distance to a transformer station are decisive factors when deciding on a location. This is because a hyperscaler, such as the one planned by Amazon, can have a power requirement of more than 100 megawatts. This is an enormous challenge that must also be met with the increased expansion of renewable energies. In this context, the topic of sustainability, which is at the top of the agenda for logistics properties due to ESG and reporting obligations, is becoming increasingly relevant for data centres. The EU stipulates that data centres should be climate-neutral by 2030. In terms of electricity, this means that photovoltaic systems, for example, play a major role on both logistics properties and data centres.
However, there are differences in the location criteria when it comes to data transmission. Data centres must provide connectivity - and with minimal latency. This means that, in addition to proximity to an internet node, the location must above all have sufficient fibre optic capacity. This is a factor that is currently less important for logistics properties. On the other hand, good transport connections are essential for logistics. A direct motorway connection, ideally even a trimodal connection with additional access to water and rail, is probably the most important location factor for logistics, while data centres are independent of this - on the contrary. For safety reasons, data centres must not be located near railway tracks or airports.
Competitive situation and market impact
Whether space size or infrastructure - many of the location criteria listed underline the tension between logistics properties and data centres, and the market will also react to the direct competition in demand for space. The growing surplus demand could drive up property prices further, particularly in urban centres. The result will be rising rents and ultimately the question of who can pay them. In most cases, the winner - due to its high profitability - will be the data centre. Logistics companies, on the other hand, will adapt their location strategies accordingly and move to peripheral areas.
In Berlin Lichtenberge, for example, Berlin's largest data centre is currently being built on a brownfield site. Originally planned as a mixed-use district, a huge data centre with investment costs of around one billion euros is now being built in the predominantly industrial environment. Another plus point: the waste heat from the future ‘Bluestar’ can either be fed into the district heating network or used for the surrounding residential neighbourhoods and commercial units.
From a field of tension to integration
The competition for data centre locations is a complex challenge that will continue to intensify as a result of digitalisation. Instead of evasive action and relocation, however, this could also be met with innovative solutions. For example, integrated projects in which both logistics and data centres coexist and share multi-storey properties are conceivable. Space efficiency and sustainability instead of constant competition would therefore be a vision for the future that could become a win-win situation for both sides.
