Data centres are buildings containing banks of computers. These computers remotely power the internet, artificial intelligence, cryptocurrency and streaming. They also store data remotely on the 'cloud'.
Understandably then, the Secretary of State for Science, Innovation and Technology Peter Kyle has recently described data centres as “the engines of modern life”.
There are already nearly 400 data centres in the UK, with over 130 of these located in London, and the demand for data centres in the UK only appears to be growing. Amazon has already announced an investment of £8 billion in building and operating data centres in Britain, while Microsoft and Google are also developing their first UK centres.
What next for data centres?
From a landlord’s perspective, data centres could present a golden opportunity. Data centres are highly specialised developments and the migration of the technology complicated, meaning such operators have the potential to be committed long-term tenants.
However, packing a warehouse with highly specialised computers isn’t straightforward. The largest data centres can be over 10,000 square feet with more than 50,000 servers. Before construction, developers need to navigate the planning system which has (so far) not been designed to specifically accommodate data centres.
Providing and maintaining adequate energy and water supplies to data centres presents a further challenge. The International Energy Agency expects that globally, data centres could be using a total of 1,000 terawatts each year by 2026, being roughly equivalent to the electricity consumption of Japan. As well as energy, a study by Savills found that even a relatively small data centre would use 26 million litres of water each year for cooling.
Planning challenges for data centre development
Data centre projects are currently considered by local planning authorities (LPAs) under the Town and Country Planning Act 1990, just as a restaurant or retail development would be.
It can be challenging to pinpoint the use class for a data centre development. Some are categorised as Class B8, being data storage facilities, but those sites focused more on data processing could be considered Sui Generis uses.
Greenfield sites near London and other major cities have often historically been identified as appropriate for data centre developments. This is due to the access to national grid and other important utilities, proximity to major data users and industries, as well as the need for large open spaces to accommodate the warehouses.
A local approach which relies on LPAs can lead to inconsistency in decision making, given the varied appetites of different local authorities for data centres. The scale of developments, as well as the environmental impacts of development in green belt spaces, can make data centres unpopular with communities and local government.
For example, in June 2024 Buckinghamshire Council refused plans for a data centre near the village of Iver due to concerns about harming “the openness of the green belt in both spatial and visual terms”. Other factors referred to the character and appearance of the area, air quality and the habitats of protected species. 63 letters were received opposing the development.
More popular have been projects using greyfield or brownfield sites. The construction of an almost £1.9 billion data centre campus was recently confirmed to be going ahead in Didcot, Oxfordshire, in the vicinity of the former Didcot coal-fired power station.
Nonetheless, opposition groups have gained pace in countries experiencing the rapid growth in the number and scale of data centre projects. For example, the Not Here Not Anywhere group has launched the campaign 'Press Pause on Data Centres' in Ireland, where figures published in 2023 revealed that data centres account for 18% of all electricity use nationwide. It is yet to be seen whether similar opposition groups will gain momentum in the UK.
Community compensation and policy support
Compensation for communities which are local to the new data centres could come in the form of agreements under s 106 of the Town and Country Planning Act 1990. These agreements are made between developers or landowners and LPAs, to require the developer and/or landowner to contribute to local infrastructure and services.
A recent decision by the London Borough of Newham approved plans for a £750 million data centre project. Under a s 106 agreement, the applicant has agreed to contribute over £4 million to the Council’s data economy programme to open up job opportunities for local people and provide education in data skills.
However, most local jobs created by data centres tend to be temporary and focused on construction. In general, sites require very few staff members for security and ongoing maintenance.
More helpful for developers could be a new, bespoke regime to accommodate data centres and the particular needs of these developments.
A recent consultation on the National Planning Policy Framework included several suggestions to support the development of data centres including:
- Updating Paragraph 86(a) to emphasise the need to support proposals for new facilities including data centres and upgrades to the electricity network grid;
- Updating Paragraph 86(b) to require Local Plans to identify suitable sites for data centres; and / or
- Potentially recognising data centres as Nationally Significant Infrastructure Projects, providing an alternative route through the planning approval process and centralising decision-making.
This consultation perhaps reflects the new government’s enthusiasm for data centre projects. Earlier this year, the Labour Party manifesto pledged to “remove planning barriers to new data centres”. Indeed, shortly after taking office, the Secretary of State for Housing, Communities and Local Government, Angela Rayner, recovered two appeals for data centres on previously developed land within the green belt for reconsideration (including the project in Iver, Buckinghamshire discussed above).
Utility access and energy challenges
Data centres need a constant supply of energy to run and also generate high levels of heat, meaning some centres need water for cooling purposes (others use a 'closed loop' system in which the water is not replaced in the data centre’s lifespan).
Some data centres will capitalise on existing nearby energy and water supplies, for example if the site is located next to a public highway which has access to utilities. This can be discovered via a utilities search and a review of title documents, for example via a recent conveyance or a deed of easement. A wayleave agreement could then be put in place to make a new connection to the energy supply.
However, the situation is more complicated if third party land is located between the intended data centre site and the public highway. Reviewing the title documents for the intended data centre site can reveal whether there is an easement in place to run services over, under or through the third-party land. Alternatively, it is possible a new easement can be granted through an agreement with the third-party land owner.
If an easement does not exist, and it is not possible for a new easement to be granted, as a last resort utility providers can compel a landowner to grant a right to lay services over, under or through third party land (though this can be time-consuming and costly).
Even if there is access to utilities, it is worth checking with clients whether the supply of energy is sufficient to power the data centre. This is particularly important because some energy supplies will be shared with other users so connecting may not be practical or feasible.
Most developers of data centre sites are therefore likely to make new connections and provide backup fuel options, such as diesel generators. Who bears the (high) cost of installing and / or decommissioning the electricity sub-stations if a data centre tenant vacates can be a key point during negotiations.
Beyond logistical issues, the energy consumption of data centres is also a key concern. There are fears that growing energy demands of data centres could hinder efforts to work towards the UK’s Net Zero Strategy. The use of back-up diesel generators also risks high levels of air pollution (though the use of such generators could well be rare in practice, being required only if the grid fails).
Solutions for energy and water demands
A possible solution to the high needs of data centres for water and energy could be migrating data centres to areas with renewable (or at least more sustainable) supplies of both. For example, Google has committed to use small nuclear reactors to support its data centres, with other operators likely to follow suit. Microsoft has also recently agreed an estimated $10 billion deal to finance new large wind and solar farms in the US and Europe to enhance energy generating capacity in existing networks.
Recycling is also a hot topic in the data centre sector, with projects to heat homes and even swimming pools using waste energy from data centres taking shape across the UK. Similarly, Amazon has already started to use purified wastewater to cool its data centres. Some LPAs have taken a proactive approach and are considering the need for waste heat recycling in their new Local Plans for development.
Conclusion
A more specialist planning regime to accommodate data centres could be on the way, which would streamline the process for these developments. In the meantime, developers may rely on identifying brownfield and greyfield sites for development and reaching s 106 agreements if necessary.
While the use of recycling and sustainable energy could help alleviate the environmental impact of data centres, developers and operators will still need to be careful at the acquisition stage that a site is appropriate for development as a data centre. Carrying out the relevant searches and prioritisation of utilities access early in the process could reduce the potential for obstacles further down the line.
Get in touch
If you would like to speak with a member of the team you can contact our real estate planning and construction solicitors; Holborn office (Email Holborn) +44 (0)20 3826 7523; Kingston office (Email Kingston) +44 (0)20 3826 7518; Putney office (Email Putney) +44 (0)20 3826 7518 or complete our form.
