An in-depth look at data centre development in the Middle East
Ajay Mangara
Associate Director
Demand for cloud services, digital transformation, plus the Internet of Things (IoT), and artificial intelligence (AI) tech is driving growth in MENA's data centre markets. Initiatives such as New Kuwait 2035 and Digital Oman 2030 are also contributing. Key hubs are attracting investment from major cloud providers, but the market still lacks the workforce required to meet growing demand.
KSA and UAE data centre markets lead in the Middle East
The UAE’s high data consumption and pioneering use of AI puts it at the forefront of the Gulf Cooperation Council’s (GCC) data centre development plans. With active data centre projects amounting to US$1.2bn and a future project pipeline of US$433m, its data centre industry is one of the fastest growing in the Middle East.
Boasting robust fibre connectivity, expanding adoption of available technologies and high internet usage with 99 percent of the population active online make UAE a significant hub for data centre investment. Dubai leads as the primary data centre market, followed by Abu Dhabi, with both recognised as smart cities in the MENA region.
The KSA also has a sizable domestic market, with a population close to 35 million and strict data protection laws bolstering its data centre market. The KSA is another leader in data centre investments, with 22 active co-location facilities and over 40 under construction. Riyadh, Jeddah, and Dammam are the primary locations for investment, while the new smart city of Neom is expanding its infrastructure to position itself as a key ICT hub, with a significant focus on attracting investment for reliable services and connections within the nation and the GCC market.
Construction costs rise across all markets
Our 2023 Data centre cost index revealed consistent year-on-year cost inflation across all regional markets due to the rising demand for data storage.
Riyadh entered the index with an average cost of US$10/W, attracting investor interest as digital connectivity and investment continue to rise in support of the national building programme and giga-projects.
Moreover, price increases for commodities such as metals and energy are pushing up construction material costs, and supply and demand imbalances are causing lead time delays.
How to mitigate against construction risks
Project procurement strategies need to encompass critical elements to ensure that data centre design, construction, and post-completion operations are efficient. This is particularly vital, given the demanding timescales required for data centre construction.
Key elements include:
• Leveraging appropriate models for each data centre project
• Employing a dedicated project management approach
• Choosing the right procurement route with appropriate risk distribution
• Engaging with the local market
• Anticipating supply chain disruptions and implementing agile procurement strategies
• Comprehensive contract management
• Proactive design scheduling
• Robust regulatory compliance.
Middle East braces for doubled demand by 2030
The Middle East's data centre market is expected to double by 2030, driven by the adoption of a digital economy and artificial intelligence applications.
The KSA and the UAE dominate the market, with 46 co-location facilities in operation. Multi-tenant data centre requirements are increasing, and modular construction is gaining feasibility in meeting these escalating requirements.
Despite advancements, challenges persist in data centre design and planning, notably around scalability constraints and a scarcity of skilled professionals.