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Denmark: A Fast-Growing Market For Data Centers

The global interest in data centers has been on a steady rise, and Denmark is no exception. The surge of artificial intelligence (AI) technologies has significantly amplified the demand for data centers - a trend that is expected to continue.

Denmark is an Ideal Location for Data Centers

As with all real estate, location is paramount for data centers. The development and operation of data centers necessitate excellent infrastructure, particularly in terms of access to a reliable power grid and robust data connectivity. The suitability of a location also depends on the type of data center, whether it be hyperscale, large-scale, co-location, or smaller-scale.

Denmark is considered a prime location for data centers due to several factors:

  • Stable political and business-friendly environment
  • Conventionalized public procedures leading to faster approvals
  • Well-developed power grid and access to multiple international data cables
  • Access to renewable energy, with approximately 80% of Denmark's energy mix being "green energy," which aligns with operators' ESG profiles and requirements
  • Good district heating infrastructure and new legislation on the way to boost utilisation of excess heat from data centers
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Trends and Future Developments

According to the Danish Energy Agency's 2024 projections on data centers' energy consumption, data centers will account for one-fifth of the total Danish energy budget by as early as 2030. The projections with respect to capacity needed towards 2040 have doubled compared to the Agency's expectations from 2023.

Years back, it was anticipated by the Danish Energy Agency that the development of data centers would predominantly involve hyperscale and large data centers situated outside urban areas, often associated with major tech companies. While such developments have occurred and are expected to continue, there has in recent years been a notable increase in interest in smaller scale data centers. This trend is expected to persist.

Smaller companies often lack the resources to establish their own data centers, making co-location data centers an attractive option. These centers cater to the demand for data center usage without the need for a full-scale facility. Additionally, smaller data centers within cities can meet the high demand for fast processing and increased security, particularly for sectors such as banking and defence. We anticipate a continued rise in the development of co-location data centers compared to hyperscale data centers. 
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Importance of Location

Hyperscale data centers, as the name suggests, are large and require substantial space, typically located in rural areas. In contrast, co-location or smaller scale data centers are more compact and can be situated near or within city limits. For businesses where speed and fast processing are crucial, having access to a local data center is more advantageous than relying on a larger, more distant facility.

Regardless of the type of data center, infrastructure remains a critical factor. A data center requires access to data cables and a reliable power supply. Additionally, data centers generate significant excess heat, necessitating effective cooling solutions. Denmark's well-established power and data infrastructure is a significant advantage for data center development.
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Securing Land

We have observed municipalities tendering properties suitable for data center development. Acquiring property from a municipality can be advantageous as zoning and planning may already be undergoing or in place. If the property is intended and tendered for a data center, there is an inherent alignment of interests, often simplifying the process of obtaining building permits and developing the data center.

If municipal land is not available or desirable, the development process can be more complex. Securing a property often involves acquiring multiple parcels from private individuals with varying interests, which can be time-consuming. Additionally, zoning and planning may not be in place from the outset, necessitating negotiations with the municipality to ensure the land's usability. Consequently, acquiring land should be contingent on obtaining the required permits.

This often requires developers to enter into multiple agreements with different stakeholders. Such agreements should provide developers with sufficient time to obtain permits and defer any land payments until the permits are secured. Furthermore, agreements with landowners should be contingent upon securing power and ensuring adequate infrastructure is in place.
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Continued Focus on Sustainability

The green agenda remains a focal point in Denmark, and the Danish real estate sector is committed to achieving a greener footprint and more sustainable development.  This commitment extends to data centers, both for developers and operators.  Denmark's access to green energy, with 80% of the energy mix being renewable, facilitates the sustainability of data centers.  However, securing power should never be taken lightly.

Data centers require substantial cooling, often achieved through water-based systems, resulting in excess heated water.  This excess heat can be integrated into the district heating grid, providing heat to local households and businesses. However, the commercially meaningful infrastructure investments from renewable energy-based sources like data centers have in many cases been hindered by the current pricing cap on excess heat intended to protect consumers. 

Fortunately, the Danish government recently announced an agreement to remove this pricing cap. This change is expected to enhance the utilization of energy and excess heat from data centers, thereby increasing sustainability and reducing the carbon footprint. The new legislation is anticipated to be enacted in the summer of 2025.
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Moalem Weitemeyer’s Expertise

At Moalem Weitemeyer, we provide comprehensive advice and support to our clients in navigating the complexities of the data center industry.

We assist in all aspects of investing in, developing, constructing, and operating data centers.
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Andreas Hvid Risvang Clement

Partner

+45 30 37 96 89

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