UK Data Centres – Power Up of Tier Two Regions

Data centres are rapidly evolving from niche infrastructure assets into a key area of UK real estate investment. As demand for cloud computing, AI, and digital services accelerates, the property sector is seizing opportunity in financing, developing, and operating these highly specialised facilities

Unlike traditional commercial real estate, data centres are increasingly defined by their dependence on power, with latency becoming less of a hurdle.  Given the recognised issues surrounding availability of grid connection and capacity, there are both challenges in securing powered-land sites, and significant opportunities for landowners (or indeed option-holders) with access to powered-land.

For years, London and its surrounding region have been the epicentre of UK data centre development. Known as tier one sites, these locations offered dense connectivity and established infrastructure, as well as ready access to a skilled workforce. But as grid constraints tighten, developers and investors are increasingly looking beyond London. The shift toward tier two sites (regional hubs outside the capital) marks a diversification in the real estate strategy for data centres.

Tier Two Sites Are Coming Online

Tier one dominance is being challenged by several factors:

• Power constraint: Securing adequate grid capacity in London is increasingly difficult, slowing down development timelines, and therefore delaying income generation and returns for investors.
• Land scarcity: Suitable sites with both space and power availability are limited, driving up costs and reducing flexibility.
• Data centre islands: The nexus of power constraint and land scarcity, also makes on-site generation to create so-called data centre islands a challenge in tier one sites, given the amount of land generally required for on-site generation.

These challenges mean that while London and the areas immediately around it remain important, they are no longer the default choice for hyperscale developments.

In contrast tier two sites are becoming increasingly attractive for data centre development:

• Grid availability: Regional sites often have more accessible grid capacity, somewhat reducing an issue to which tier one projects can be subjected.
• Renewable co-location: Moving outside tier one areas makes PPAs with co-located renewable generators (which often require large areas of land) financially viable, creating opportunities for greener power sourcing.  Grid connections remain important, given the paramount necessity for resilience in constant supply of power.
• Land affordability: Larger, cleaner sites are available at lower costs, enabling hyperscale developments that would be harder to finance in tier one areas.
• Planning advantage: with local authority policies targeting net zero aims, renewable co-location and the associated land required for it, can make two tier sites attractive for a smoother planning process.
• Community integration: Regional authorities may be more supportive of data centre projects, especially when they bring benefits such as heat networks or local employment.

This diversification reflects a broader data centre real estate trend: value is shifting from central urban hubs to regional power-secured sites.

Site Selection in the New Landscape

With tier two sites rising in prominence, site selection criteria are evolving:

• Powered-land as a new asset class: Access to power has become the primary driver of site selection, overtaking latency considerations. Developers prioritise sites where power can be delivered quickly and reliably. Land with guaranteed power connections (so-called “powered-land”) is gradually increasing in value as farmers and traditional landowners are recognising the premium attached to their assets when power security is assured.
• Planning support: Authorities sympathetic to data centre development, and willing to integrate renewable co-location or even heat off-take opportunities, can become key partners.
• Resilience: the option of co-located grid connections and power sources enhance reliability, making regional sites competitive with London’s established infrastructure.
• Labour and logistics: workforce access and transport links remain critical for both construction phase and operation life of data centres.

For investors, this means that powered-land in tier two regions is now an attractive development opportunity once reserved for London sites.

Sustainability and Regional Advantage

Tier two sites may also offer sustainability advantages:

• Renewable integration: Whilst sufficient long-duration battery lithium systems or even SMRs seem someway off meaning that a grid connection remains the primary concern, regional sites often have more flexibility to co-locate with renewable energy sources, aligning with planning requirements and investor ESG goals.  This can also align more readily with the trend towards more green-lease clauses, which may require tenants to use reasonable endeavours to source electricity from renewable sources where possible. Moreover, with power as the main expense, co-location with on-site generation can help to offset the operational cost of a data centre.
• Water management: The latest data centre GPUs’ operating temperatures are increasing, when compared to their predecessors.  To maintain operational efficiency, cooling systems are needing to become more advanced.  Traditional air cooling is often insufficient for these high-density, high-heat systems. Whilst direct liquid cooling is becoming the preferred and most effective method for high-performance GPUs, data centre operators are engaging with chip makers like NVIDIA to encourage the design of components that can safely tolerate higher operating temperatures, which would allow for more efficient cooling systems using warmer water.  This does however mean that access to adequate water supply is important.
• Heat off-take opportunities: Smaller communities may benefit more directly from data centre heat networks, improving public acceptance.

These factors make tier two sites not only viable but often preferable for sustainable data centre development.

The UK’s data centre landscape is diversifying. While London’s tier one sites remain important, the future increasingly also lies in tier two regional hubs where grid access, land availability, and sustainability integration align. For real estate investors, this shift underscores a new mantra: power-secured regional sites are the next frontier of data centre value.

By moving beyond London, developers can unlock larger, greener, and more resilient projects - positioning tier two sites as a backbone of the UK’s digital economy.

To learn more contact Simon Boyes or click here.

Stay switched on with all our Energy and Resource Management news by following our dedicated showcase page.