How data centre developers and investors can approach strategic real estate considerations in Europe

Data centres have evolved from specialised technical facilities to becoming the backbone of the artificial intelligence (AI) and digital economy.  In September 2024, the UK government designated data centres as critical national infrastructure, marking a turning point in how these facilities are developed and regulated. For stakeholders across the real estate sector, critical national infrastructure status brings several new considerations from site selection and planning permissions to operational requirements and long-term investment strategies.

In parallel, the EU Network and Infrastructure Directive 2 (NIS2) and Critical Entities Resilience (CER) Directive assign data-centre service providers as critical entities under the latter and essential entities under the former. While the CER Directive focuses on physical security, the NIS2 concerns digital resilience. As a consequence, providers are subject to stricter obligations around risk management in both areas, including the fulfilment of reporting obligations. 

Critical national infrastructure 

In the UK, critical national infrastructure status recognises data centres as facilities whose incapacity or destruction would have a crippling impact on national security, economic security or public health and safety. This classification places data centres alongside other key assets, systems and networks that are fundamental to the functioning of society, such as health, utilities, transport and defence.

Likewise, the EU CER Directive explicitly identifies data-centre service providers as critical entities. This status is confirmed by Member States after examining additional criteria, such as the impact of potential incidents on the services provided. Recognition of an entity as critical automatically determines its status as an essential entity within the meaning of NIS2, regardless of its size.

In practical terms, it means enhanced regulatory oversight, additional security requirements and access to government support during emergencies, impacting all stages of the property life cycle from acquisition to disposal.

Site selection

Critical national infrastructure designation or critical entities require a different approach to site selection, balancing commercial viability with security, resilience and national strategic considerations not typical of conventional property development. While core requirements such as connectivity, communication networks and energy infrastructure remain important, critical infrastructure obligations introduce additional layers of complexity.

For hyperscale facilities –  large data centres designed to scale high-volume data processing and storage – this means identifying substantial land parcels capable of accommodating not only massive computing infrastructure but also the enhanced security perimeters, redundant power systems and buffer zones. Co-location centres – facilities where customers can rent space to host their servers – face different challenges that require balancing customer and staff access with the stringent security and resilience requirements.

Proximity and security risks

Given the importance of latency for applications including IoT and AI, geographical proximity of data centres to end users is key to reducing data transit time as well as security risks. Connection to cities via public roads and transport networks benefits employees and other personnel and can offer important security advantages.    

The physical security of the site is also of paramount importance, which can be achieved through secure perimeters and multi-layered security zones. Developers and investors should consider sites that offer natural security advantages, such as limited access points and reduced visibility from surrounding areas.

Geographical risks

Sites must be evaluated for exposure to natural disasters, including extreme weather events such as flooding. Both the national critical infrastructure and critical entity status demand higher resilience standards, making sites in high-risk zones less attractive or requiring substantial additional investment in protective measures. Flood risk assessments, geological surveys, and climate change projections should be at the fore of due diligence for developers and investors.  

Environmental and sustainability considerations

Depending on the investment project, data centres can be classified as projects with a potentially significant impact on the environment, particularly regarding energy consumption and water which is a necessity for cooling. Similarly, sustainable and renewable power sources are also a consideration. Any environmental decisions must demonstrate how the data centre facility will minimise ecological impact while maintaining the resilience required of critical national infrastructure or critical entity.

Potential trading restrictions

Restrictions can significantly affect the feasibility and process of acquiring a data centre property.

Agricultural land

While data centres tend to locate in suburbs due to good energy infrastructure, city connections and lower land prices, agricultural land is often subject to restrictions. Some EU jurisdictions apply controls to agricultural or protected land, so classification against land registries and the applicable plan should be checked at the outset.

In Poland, for example, there are specific restrictions under the Agricultural System Restructuring Act or UKUR. Agricultural land, as defined by UKUR, includes properties used or capable of being used for agricultural production. UKUR restrictions vary by property size (with different rules for properties less than 0.3 hectare, between 0.3 hectare and one hectare, and more than one hectare). Where applicable, a decision authorising exclusion of land from agricultural production must be secured before commencing non-agricultural use. This triggers a one-off fee plus annual fees for 10 years, each at 10% of the initial exclusion fee, payable from the date of actual exclusion.

While both the critical national infrastructure and critical  entity status may strengthen the case for restrictions or even exclusion, they also support a case for demonstrating that the specific site is necessary and that alternatives have been properly considered. The financial obligations associated with agricultural land exclusion – including one-off fees and ongoing annual payments – must also be factored into long-term investment calculations.

Pre-emption rights

Pre-emption rights in favour of the state, municipalities or zone administrators are common. In Poland, various laws grant this right, including the Real Estate Management Act, Special Economic Zones Act, Water Act, and Forest Act. Although pre-emption is rarely exercised, failure to observe it can invalidate a sale or lead to claims, so conditional structuring and early engagement are key. 

Ownership and financing 

As data centres are now considered to be strategic real estate assets, there is strong competition among developers and investors for ideal land parcels. Data centre use will often be the highest land value use where power and connectivity are available or resolvable – helping unlock viability for some developments where the data centre can co-exist alongside other uses. Lenders may also view critical infrastructure data centres more favourably due to their strategic importance as well as the potential to benefit from specific government incentives such as tax breaks and infrastructure grants. 

Nevertheless, enhanced security and compliance requirements will require extensive due diligence and increase transaction costs. Specialised financing structures may be necessary to accommodate the risk-return profile of critical national infrastructure or critical entity real estate.

Planning considerations

Planning conditions can determine whether a data centre project is feasible and how it will proceed. Local plans remain the primary tool for determining whether a data centre can be built on a site. As data centres are relatively new in several markets, plans often do not explicitly refer to them and place them within logistics or industrial categories.

Investors and developers should analyse plan definitions closely, test how cooling plant, noise, traffic and landscaping requirements will be applied, and seek an early view from the planning or building authority.

In Poland, local spatial development plans (MPZP) determine data-centre development feasibility. Data centres are typically located in areas designated for logistics or production facilities. Investors must verify MPZP provisions and consult building authorities to confirm compliance.

For properties without an MPZP, a development conditions decision, or WZ, is required based on the good neighbourhood principle. Recent planning reforms will replace general development studies with general plans by 30 June 2026, affecting WZ application timing and applicable regulations.

Where MPZP prohibits data centre construction, investors may pursue an integrated investment plan (ZPI). These are bespoke planning tools that enable any investment type; however, municipal councils can refuse participation and implementation remains challenging due to limited precedent and strong municipal negotiating positions.

In other jurisdictions, there may also be new responsibilities for planning processes and permitting.  For example, the UK's revised National Planning Policy Framework has addressed data centres by requiring local authorities to consider the need for data centres when setting local policies and deciding planning applications. 

Draft regulations have also been published which, once in force, will permit developers to seek approval from the secretary of state to treat data centres as developments for which development consent is required. Application for development consent have a high success rate as they are determined by the secretary of state through a bespoke process created for nationally significant infrastructure projects, as opposed to planning applications which are determined by local planning authorities.  New AI growth zones also aim to offer streamlined planning  approval processes and infrastructure support for data centres.

More broadly, critical national infrastructure or critical entity status can also attract mandatory consultations with national security agencies, which can influence site approval, design requirements and operational conditions. Developers and investors should prepare for longer planning timelines and be prepared to modify proposals to address security concerns. In some cases, certain design details may become subject to confidentiality requirements, complicating the planning process.

Administrative approvals 

Once a site has been identified and legal title secured, developers and investors must navigate a series of administrative approvals before construction can commence. 

Environmental impact assessment

Requirements can vary by jurisdiction but often include an environmental impact assessment. Following determination of planning conditions, they must assess  whether an environmental decision is required. Data centres frequently trigger environmental assessment requirements due to energy consumption, cooling systems and associated infrastructure including access roads and car parks.  

For example, in Poland, data centres with the built-up area not less than one hectare (0.5 hectares near protected areas) may require an environmental decision and impact assessment report whereas France mandates assessments under article R.122-2 of the French Environmental Code due to energy and cooling units. UK projects must demonstrate 10% net increase in biodiversity, maintained for at least 30 years, in accordance with mandatory biodiversity net gain requirements.

Environmental decisions should be obtained early in the process – before development conditions decisions or building permits –  to avoid long and costly delays. 

Building permits

Building permit approval is also essential before construction begins.  The duration of the approval process varies by location, with timelines ranging from several months to over a year depending on the relevant regulatory framework and the complexity of the project. In France, building permits are required under the urban planning code. Draft legislation, referred to as the " simplification bill" proposes to recognise data centres as "'projects of great national interest"', enabling faster permitting processes. In Poland, data centre designs must incorporate enhanced security features, demonstrate adequate cooling capacity for equipment loads whilst ensuring compliance with environmental noise emission standards.  

Occupancy permit

The requirement for an occupancy permit also varies between jurisdiction and often depends on the building category classification. In Poland, it is mandatory for service and industrial buildings including data centres. The permit is issued following building control inspection confirming construction compliance with approved plans and successful commissioning of all critical systems. Only after obtaining this permit may the investor or tenant lawfully use the facility. 

Osborne Clarke comment

Developing and operating data centres as critical national infrastructure or critical entity requires a comprehensive real estate strategy that addresses the complex interplay between site selection, technical infrastructure, planning requirements and operational resilience.

Rigorous due diligence is essential to identify and mitigate risks before they translate into project delays or operational constraints. For data centres, this now extends beyond conventional property assessment to encompass security vulnerabilities, resilience capabilities, and compliance with critical infrastructure standards. By integrating these real estate considerations from project inception, investors and operators can establish the legal certainty, operational resilience and strategic positioning that critical infrastructure or critical entity status demands.

Thorough due diligence is vital to identify potential risks and mitigate them effectively. By thoroughly understanding and addressing these real estate aspects, investors and developers can ensure legal stability, operational efficiency, and long-term success for their data centres. Adopting a comprehensive approach to real estate planning will enable data centres to operate seamlessly and maintain their competitive edge in the market.