European colocation market fills gaps in demand for data center capacity CBRE research shows that this is due to a decrease in the appetite of hyperscale cloud companies due to convergence with neo-cloud technology providers.
An analysis of the European data center market by a real estate consultancy in the third quarter shows that while demand for colocation hyperscalers has fallen, the amount purchased to host artificial intelligence (AI) workloads has increased sharply.
This demand comes from neo-cloud AI infrastructure providers such as Nscale and Coreweave. The amount of data center capacity sold to such organizations has tripled over the past year, according to CBRE.
“The amount of data center capacity sold to non-cloud computing providers in the first nine months of the year rose to 414 MW, up from 133 MW over the same period in 2024,” CBRE said in the report.
While the report noted that London was where the majority (68MW) of the 114MW of new data centers coming online in the third quarter of 2025 was delivered, it also confirmed that the Nordics are the most popular location for neo-cloud providers looking to deploy capacity.
“More than half of the volume of signings (57%) is for capacity in the Nordic countries such as Norway and Iceland… [as] regional data center providers can offer non-cloud computing providers…demand-intensive computing hardware, lower energy costs and affordable power that is increasingly difficult to find in Europe,” the report said.
Kevin Restivo, director of European data center research at CBRE, said electricity is often the biggest expense for AI infrastructure providers, so it makes sense to prioritize the Scandinavian countries, where cheaper renewable energy is abundant.
“We see huge growth in this segment, especially in the Nordic countries. [for that reason]where cheaper renewable energy is often available in greater quantities than in many other European markets,” he said.
Market problems
The rapid growth of some neo-cloud technology providers has raised eyebrows in certain segments of the IT industry. Vendors like Nscale rose to prominence seemingly overnightproviding incredible volumes of external investment.
As mentioned in the CBRE report, the lack of history and track record of some of these neocloud providers has not gone unnoticed by the colocation community, and operators are taking steps to mitigate the risks associated with doing business with them.
“The majority of European data center providers accept neocloud companies as tenants, despite their significant AI infrastructure requirements and short operating history,” CBRE said. “Data center providers are taking steps to mitigate additional risks by leasing capacity to neocloud companies. For example, higher rents are charged to account for higher risk customers and help offset the significant construction costs incurred in building AI-enabled data centers. Rental deposits and parent company guarantees are sometimes sought from neocloud firms as well.”
Andrew Jay, head of data center solutions for Europe at CBRE, said neo-cloud providers are also ingratiating themselves with colocation companies by “sucking up empty space that was originally intended for hyperscalers.” As an example, the CBRE report cited an incident in February 2025 when a hyperscaler “paused negotiations” for data center capacity in Europe, leaving some operators with empty space.
“This is a sign that many data center providers are becoming more comfortable with the ambitions of neo-cloud providers and the agreements associated with them,” Jay added.
