Digital infrastructure is booming in 2026, with the Middle East and the UK leading the charge. The Middle East is scaling its data centre capacity from 1 GW in 2025 to 3.3 GW by 2030, while the UK is tackling energy challenges to support its growing AI demands. Here's what you need to know:
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Middle East Highlights:
- Data centre investments: Over $7 billion under construction and $13 billion in planning.
- AI's economic impact: 12.4% of Saudi Arabia's GDP and 14% of the UAE's by 2030.
- Competitive energy costs: $0.05–$0.06 per kWh vs. $0.09–$0.15 in the US.
- Key projects: NEOM's Oxagon AI campus and Stargate UAE's 5GW AI facility.
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UK Highlights:
- AI workloads driving demand: Expected to make up 50% of data centre activities by 2030.
- Power challenges: Grid connection delays and high electricity costs.
- Government initiatives: £750 million for a national supercomputer and regional AI Growth Zones.
Both regions are integrating renewable energy, with the Middle East leveraging solar and nuclear, while the UK focuses on wind. The global sector will require $3 trillion by 2030, doubling capacity to meet AI's demands.
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Middle East Data Center Market Growth
The Middle East is undergoing a digital transformation, with its data infrastructure rapidly expanding. Forecasts suggest that the region's capacity could nearly triple in the coming years, fueled by the rise of AI, government-driven smart city projects, and its strategic location as a global data hub. This surge in demand has sparked significant construction investments, laying the groundwork for a closer look at the financial and regulatory factors shaping this growth.
The data centre construction market in the Middle East is projected to grow from US$5.24 billion in 2025 to US$19.86 billion by 2031, marking a compound annual growth rate (CAGR) of 24.85%. In 2024, the UAE accounted for 33% of regional construction revenue, while Saudi Arabia is emerging as a high-growth market with a 21.2% CAGR, largely driven by its Vision 2030 agenda.
Smart city initiatives are also playing a pivotal role in boosting infrastructure investments. For example, Saudi Arabia's NEOM project includes Oxagon, a net-zero AI data centre campus set to launch in 2028. The project’s first phase, with a 1.5GW capacity, represents a US$5 billion investment. Similarly, in May 2025, the UAE partnered with the White House to announce Stargate UAE, a 5GW AI campus in Abu Dhabi. Backed by OpenAI, NVIDIA, Microsoft, and the US$100 billion MGX AI Fund, the first 200MW phase of this project is set for 2026 and will feature 100,000 NVIDIA AI chips.
The region's energy advantages are reshaping its global appeal. Electricity costs in the UAE and Saudi Arabia range from US$0.05 to US$0.06 per kWh, significantly lower than the US average of US$0.09 to US$0.15 per kWh. Industrial land costs are also highly competitive, with Saudi Arabia offering rates between US$10 and US$50 per square metre, compared to the US$150 to US$600 range in US hubs like Northern Virginia. Additionally, Saudi Arabia's solar potential stands out, with 8.9 hours of daily sunshine and high irradiation levels of 250 W/m², compared to the global average of 100–200 W/m².
UAE and Saudi Arabia Investment Landscape
The UAE and Saudi Arabia are leading the region’s growth, leveraging sovereign wealth funds and regulatory incentives to drive development. In April 2025, Amazon Web Services announced a US$5.3 billion investment to establish new data centre regions in Saudi Arabia, catering to the rising demand for cloud services. Around the same time, Khazna Data Centres launched a 100MW AI-optimised facility in Ajman, UAE, as part of its broader expansion strategy.
Sovereign wealth funds are shifting focus from oil to digital infrastructure. Saudi Arabia’s Public Investment Fund is backing the US$100 billion Transcendence AI Initiative, while Project MGX, a US$30 billion hyperscale project led by Microsoft, BlackRock, and Temasek, aims to enhance Riyadh’s infrastructure. Saudi Arabia’s Cloud Computing Special Economic Zone offers tax breaks and streamlined processes to attract foreign investors. The Kingdom is on track to add 1,300MW of new capacity by 2030, while the UAE plans to add 500MW. Both countries also benefit from strategic submarine cable systems, such as 2Africa, SMW6, Blue, and Raman, solidifying their positions as global data hubs.
Energy infrastructure is evolving alongside these developments. In April 2025, Masdar announced a renewable energy facility capable of generating 1GW of uninterrupted power, specifically designed for AI-focused data centres. This facility is expected to be operational by 2027. Meanwhile, ACWA Power is managing 11 solar projects in Saudi Arabia, with a combined capacity exceeding 12GW, contributing to the Kingdom’s target of achieving 50% renewable energy by 2030.
Turkey, Oman, and Kuwait Market Development
Emerging markets like Turkey, Oman, and Kuwait are also making strides in digital infrastructure, complementing the growth in the UAE and Saudi Arabia. Kuwait’s New Kuwait 2035 initiative has spurred projects like Omniva’s planned 1GW data centre, supporting the nation’s digital transformation efforts. These markets offer advantages such as lower land costs and government incentives, though navigating regulatory landscapes remains essential.
Turkey’s strategic location between Europe and Asia, combined with its expanding tech sector, is attracting data centre investments. Oman, on the other hand, benefits from its subsea cable landings and proactive government policies aimed at strengthening its digital infrastructure. Together, these nations are solidifying their roles in the region’s growing data economy.
UK Data Center Market Analysis
The UK is experiencing a surge in demand for data centres, driven by the growing needs of AI workloads. With 523 operational facilities, the UK ranks as Europe's third-largest data centre market and holds the same position globally in terms of facility count. Recognising the sector's importance, the UK government classified data centres as "Critical Infrastructure" in September 2024. This designation reflects their annual contribution of £4.7 billion in Gross Value Added (GVA). Currently, data centres account for 1–2% of the UK's electricity consumption, but this figure is expected to rise to 10% by 2050 - enough to power over 11 million homes. These developments highlight how AI and energy challenges are reshaping the UK's data centre landscape.
AI Expansion and Power Requirements
The rapid growth of AI is influencing how data centres are designed and where they are located. With rack densities approaching 100 kW, liquid cooling is becoming a necessity, even in older facilities. By 2027, inference workloads are expected to surpass training workloads, prompting the need for more geographically distributed sites to minimise latency.
"Power, not location or cost, will be the primary site selection criteria due to multiyear wait times for a grid connection." – JLL
Power availability has emerged as a key obstacle. To overcome this, operators are exploring behind-the-meter solutions like private wire renewables, battery storage, and small modular reactors. Some projects in the EMEA region have shown that these approaches can cut power costs by up to 40% compared to standard grid rates. This shift underscores the urgency for UK operators to rethink capacity planning and adopt energy-efficient strategies.
The government is also stepping in to address these challenges. In July 2025, it pledged up to £750 million to establish a new national supercomputer service at the Edinburgh Parallel Computing Centre (EPCC). Scheduled to go live in 2027, this facility will feature next-generation chips to support both traditional modelling and AI workloads, with a projected capacity to rank among the top five globally. Additionally, the AI Research Resource (AIRR) aims to expand its capacity from 21 AI ExaFLOPS in 2025 to 420 AI ExaFLOPS by 2030.
London and Established Hub Limitations
London remains one of the world's top five data centre markets. However, established hubs like London face mounting challenges that threaten their efficiency. Industrial electricity prices in the UK are 46% higher than the global median. Resource limitations further complicate operations; for example, the Oxford–Cambridge corridor struggles with water shortages for cooling, and grid capacity constraints are pushing developers to consider alternative locations.
Globally, the cost of constructing data centres has been rising, with a 7% compound annual growth rate between 2020 and 2025. By 2026, construction costs are projected to reach $11.3 million per MW, and when AI infrastructure like GPUs and networking is factored in, total costs can climb to $25 million per MW.
To alleviate these issues, the UK is introducing AI Growth Zones (AIGZs) to decentralise infrastructure away from London and encourage regional investments. Scotland, for instance, has the potential to support up to 1 GW of data centre capacity near wind farms, leveraging low-carbon power that might otherwise go unused. In London, the Old Oak and Park Royal Development Corporation (OPDC) received £36 million in government funding in December 2023 to develop a heat network. This initiative will repurpose waste heat from local data centres to provide heating for over 10,000 homes and 250,000 m² of commercial space.
Digital Infrastructure Investment Drivers
As digital markets expand rapidly, three key factors are reshaping investment strategies in digital infrastructure: AI adoption, renewable energy integration, and smart city development. These elements are redefining the economics, design, and location priorities for data centres in regions like the Middle East and the UK.
AI-Optimised Facilities and Performance
The rise of AI is driving a significant transformation in data centre requirements. Traditional facilities struggle to handle the demands of AI workloads, creating a need for specialised infrastructure. By 2026, hyperscale cloud companies are projected to invest a staggering US$450 billion in AI infrastructure. AI workloads, which accounted for about 25% of data centre activities in 2025, are expected to double to 50% by 2030.
AI operations demand up to ten times more power than traditional workloads [1,4]. This shift increases rack densities to as high as 100 kW and requires advanced cooling systems, such as liquid and immersion cooling, to replace conventional air cooling methods. In 2024, global data centre electricity consumption surged by 73%, reaching approximately 415 TWh.
"AI workloads require substantially more power and advanced cooling solutions than traditional workloads, creating a surge in demand for high-performance data centre infrastructure." – PwC Middle East
A notable development is expected by 2027, as inference workloads (applying AI models) surpass training workloads as the primary driver of demand. This shift will necessitate more geographically distributed infrastructure to minimise latency for end users, significantly influencing capacity planning. Leading tech companies like Meta, Microsoft, Amazon, and Google are already securing long-term nuclear power agreements to meet the high-density energy needs of AI operations. Additionally, GPUs are increasingly viewed as long-term infrastructure assets due to their stable demand and extended lifespans.
Solar, Wind, and Cooling Technology Integration
Renewable energy has become a financial imperative for data centre operators, not just a sustainability goal. In the EMEA region, integrating renewable energy with private wire transmission can cut power costs for tenants by up to 40% compared to traditional grid power.
The Middle East stands out as a hub for renewable energy integration. Electricity tariffs for data centres in Saudi Arabia and the UAE range between US$0.05 and US$0.06 per kWh, significantly lower than the US average of US$0.09 to US$0.15 per kWh. This cost advantage, combined with abundant solar resources, has attracted major investments. For instance, in February 2023, Moro Hub, a subsidiary of Digital DEWA, launched the world's largest solar-powered data centre at Dubai's Mohammed bin Rashid Al Maktoum Solar Park. This Tier III-certified facility operates entirely on renewable energy, aligning with the region's digital economy goals [18,20].
Global hyperscale operators, including Amazon, Microsoft, Meta, and Google, have collectively secured nearly 50 GW of renewable energy capacity through corporate power purchase agreements (PPAs). Many operators are now moving toward owning energy generation assets outright, bypassing lengthy utility interconnection delays that can exceed four years in key markets.
"ESG leadership in this sector is no longer optional but essential." – Norton Rose Fulbright
Scotland's wind energy capacity is forecasted to expand by up to 30 GW by 2030, offering opportunities to site data centres near generation facilities to utilise surplus power. Cooling innovations are also gaining traction. For example, EcoDataCenter in Sweden uses 100% renewable energy from nearby hydroelectric and wind sources. It also integrates with a local heating plant to repurpose waste heat for industrial processes, achieving a "climate positive" status.
These advancements in renewable energy and cooling technology not only reduce costs but also support the infrastructure needs of emerging smart city projects.
Smart City Projects and Digital Demand
As energy-efficient technologies advance, smart city initiatives increasingly depend on localised digital solutions. In the Middle East, projects like Dubai Internet City and Saudi Arabia's Vision 2030 are driving data centre growth to support services such as e-governance, smart transportation, and urban management.
Riyadh's population is projected to reach 10 million by 2030, necessitating extensive digital infrastructure investments. Saudi Arabia's NEOM project already features a net-zero AI factory campus designed to balance large-scale data processing with environmental goals.
In the UK, the government is fostering AI innovation through "AI Growth Zones" and prioritising data centre expansion under its AI Opportunities Action Plan. This initiative could contribute an additional £44 billion in GVA between 2025 and 2035.
"The UK is in a unique position to leverage its expertise in technology and energy to deliver innovation in both the application of AI and the rapid uptake of data centre infrastructure." – Energy UK
Smart city projects are also integrating digital infrastructure with urban utilities. For instance, London's Old Oak and Park Royal Development Corporation received £36 million in June 2025 to create a heat network that captures waste heat from local data centres. This system will provide low-carbon heating for over 10,000 homes and 250,000 m² of commercial space.
Additionally, the rise of "sovereign AI clouds" is driving investments in localised AI processing to comply with regional data privacy regulations and support Arabic language models [1,5]. By 2027, the shift from AI training to inference workloads is expected to redistribute processing from centralised clusters to regional hubs, fundamentally altering deployment strategies.
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Investment Approaches and Market Opportunities
Investing in digital infrastructure in 2026 means tackling power limitations, navigating regulations, and addressing the growing demands of AI. To stay ahead, new strategies are emerging that streamline investment processes despite these challenges. Three key models are shaping the flow of capital into data centre development: colocation expansion, joint ventures and M&A, and powered land development.
Colocation Market Expansion
The colocation market is booming as businesses and hyperscalers look for scalable and flexible capacity without committing to building their own facilities. The GCC region, for instance, is set to double its colocation capacity by 2030, offering a wealth of opportunities for investors. This growth supports both wholesale leasing, where entire facilities are leased to a single tenant, and retail colocation, which involves multiple tenants sharing the same infrastructure.
However, rising construction costs are a challenge. In 2025, costs reached US$10.7 million per MW and are expected to rise to US$11.3 million per MW in 2026 due to higher material prices and the need for specialised cooling systems. For AI-focused data centres, costs can soar as high as US$25 million per MW to support GPU clusters and liquid cooling systems. Despite these challenges, the Middle East remains attractive for its lower industrial land costs and competitive electricity tariffs, ranging from US$0.05 to US$0.06 per kWh.
M&A and Joint Venture Structures
Public-private partnerships and joint ventures are proving essential for overcoming regulatory challenges and gaining access to state-owned land. A notable example is KKR's 2024 strategic partnership with Gulf Data Hub, where US$5 billion was committed to advancing data centre infrastructure across the region. Similarly, Equinix teamed up with Omantel to develop the SN1 facility in Salalah, leveraging Oman's subsea cable landing stations for low-latency connectivity between Asia, Africa, and Europe.
"The Middle East's data centre landscape is evolving at an unprecedented pace, driven by digital transformation, the rise of hyperscale facilities, and the integration of AI technologies." – Ayman A. Khaleq, Partner, Morgan Lewis
Investors are increasingly turning to portfolio financing, which bundles multiple data centre assets into a single package to spread risk and attract funding. Hybrid financing models, combining elements of project finance, real estate finance, and leveraged structures, are becoming more common. Additionally, Islamic finance instruments like sukuk (asset-backed securities) are gaining popularity alongside conventional commercial debt. Clear legal contracts are critical for managing disputes, especially those tied to 'good faith' clauses in local courts.
Gamcap's Powered Land Development Model
To address delays in grid connections and energy constraints, Gamcap has introduced a powered land development model. This approach integrates renewable energy infrastructure - such as large-scale solar, wind, and battery storage - directly into the site, reducing reliance on overburdened grid connections. In some markets, grid connection wait times now exceed four years, making this model a practical solution.
Gamcap's strategy includes in-house developments, acquisitions, and partnerships with local entities. With over 2 GW in its pipeline and more than 100 projects completed globally, the company focuses on renewables, digital infrastructure, and grid support. In the Middle East, Gamcap aligns its efforts with major initiatives like Masdar's 5.2 GW solar PV and 16 GWh battery storage project in Abu Dhabi. By securing power infrastructure early, developers can bypass long delays and meet the sustainability goals demanded by hyperscale tenants.
The model also supports a shift toward behind-the-metre power, where operators generate their own energy to avoid grid bottlenecks. This not only cuts energy costs but also helps facilities meet the strict carbon-reduction targets set by global hyperscalers.
Middle East and UK Market Comparison
Middle East vs UK Data Center Markets: Investment, Energy Costs, and Capacity Comparison 2025-2030
This section delves into the differences between the Middle East and UK data centre markets, focusing on power capacity, investment trends, and energy policies.
Power Capacity and Market Share Data
The UK boasts 523 data centres, ranking third globally, but struggles with grid connection delays. Meanwhile, the Middle East is in a phase of rapid growth, with its data centre capacity expected to expand from 1 GW in 2025 to 3.3 GW by 2030. By 2026, the GCC's per capita data centre capacity is predicted to hit 15 W/capita, more than double the global average of 7 W/capita.
In the UK, data centres currently account for 1–2% of electricity demand, a figure projected to rise to 10% by 2050. In the Middle East, significant investments are shaping the landscape. Microsoft has pledged US$7.3 billion to the UAE's digital infrastructure by 2025, with plans for an additional US$7.9 billion between 2026 and 2029. AI is also set to play a transformative role, contributing 12.4% to Saudi Arabia's GDP and 14% to the UAE's economy by 2030.
Renewable energy strategies differ significantly between the two regions. The UK leans heavily on wind power, especially in Scotland, as part of its "Clean Power Mission." In contrast, the Middle East employs a mix of solar, nuclear (e.g., the Barakah plant), and natural gas. A standout project in the UAE is the US$6 billion Masdar and Emirates Water and Electricity Company initiative, which includes a 5.2 GW solar PV plant paired with a 19 GWh battery energy storage system. This project aims to deliver 1 GW of continuous renewable power by 2027.
Government Support and Energy Policy
Governments in both regions are adapting to these trends with targeted policies. Middle Eastern nations are integrating data centre development with renewable energy goals through initiatives like Saudi Arabia's Vision 2030 and Dubai's smart city programmes. Investment is often fuelled by sovereign wealth funds such as PIF, Mubadala, and QIA, working alongside global private equity firms like KKR. In Saudi Arabia, the Communication, Space, and Technology Commission mandates that data centre operators register and adhere to energy management and sustainability requirements.
In the UK, the government has taken steps to promote sustainable energy use. For example, £36 million was allocated in June 2025 to fund the Old Oak and Park Royal Development Corporation heat network. This project repurposes waste heat from London data centres to provide low-carbon heating for 10,000 homes and 250,000 square metres of commercial space. However, the UK faces challenges with "anticipatory investment", where networks are unable to build infrastructure ahead of demand. In contrast, Middle Eastern markets often rely on sovereign wealth funds to pre-finance large-scale infrastructure projects.
Energy Costs and Investment Risks
Energy costs are a key factor distinguishing the two markets. UK industrial electricity prices are 46% higher than the median among International Energy Agency member countries. In comparison, electricity tariffs in Saudi Arabia and the UAE range between US$0.05 and US$0.06 per kWh, roughly half the lowest rates in the US. Across the EMEA region, combining renewable energy with private wire transmission can cut tenants' power costs by 40% compared to grid electricity.
The UK's temperate climate offers a natural advantage for passive cooling in data centres. On the other hand, the Middle East faces challenges with extreme heat and water scarcity, necessitating advanced cooling technologies like seawater-based or closed-loop systems. Industrial land costs also vary greatly: in Saudi Arabia, prices range from US$10 to US$50 per square metre, while in major US hubs, they can soar to US$150 to US$600 per square metre. However, investing in the Middle East comes with its own complexities, such as navigating legal frameworks that include "duty of good faith" clauses in contracts and mandatory registration with regulatory bodies like Saudi Arabia's CST.
Digital Infrastructure Outlook Through 2030
The digital infrastructure sector is entering a massive growth phase, with investments expected to reach up to US$3 trillion by 2030 to keep up with skyrocketing demand. By then, global data centre capacity is set to double, adding nearly 100 GW, largely driven by artificial intelligence (AI). AI alone is anticipated to handle 50% of workloads by 2030, marking a significant shift in how capacity is allocated. This growth reflects a major transition from AI training workloads to inference workloads, which apply trained models to practical applications.
By 2027, AI inference workloads will surpass training as the main driver of demand. This shift will require data centres to be more geographically distributed, minimising latency and enabling faster edge computing deployments. In the EMEA region, a 10% compound annual growth rate (CAGR) is projected through 2030, fuelled by government-supported sovereign AI clouds and strict data privacy regulations.
As grid connection delays persist, operators are increasingly turning to on-site power solutions that combine energy generation with battery storage. Renewable energy is expected to make up 45% to 50% of the global energy mix by 2030, a significant jump from today’s roughly one-third. Meanwhile, the cost of shell and core construction is forecast to climb to US$11.3 million per MW by 2026, a 6% increase over 2025. These trends highlight the growing importance of sustainable and self-reliant energy solutions to support digital expansion.
"The sector is experiencing an infrastructure investment supercycle requiring up to $3 trillion by 2030." - JLL 2026 Global Data Centre Outlook
At the same time, financing models are adapting. In the Middle East, stakeholders are increasingly leveraging Islamic finance instruments like sukuk alongside sovereign wealth funds such as PIF and Mubadala. The region also benefits from competitive advantages like electricity tariffs ranging between US$0.05 and US$0.06 per kWh and industrial land costs of US$10 to US$50 per square metre, making it an attractive hub for digital infrastructure investments.
FAQs
What is driving the growth of digital infrastructure in the Middle East and the UK?
The expansion of digital infrastructure in the Middle East is being powered by ambitious smart city initiatives such as Dubai Internet City and Saudi Arabia’s Vision 2030. These projects demand cutting-edge data processing and storage solutions. The increasing adoption of AI, IoT, and cloud services, further bolstered by investments from leading tech firms, plays a significant role in this growth. The region’s ample land and energy resources provide a strong foundation, though challenges like water scarcity and environmental concerns remain critical considerations.
In the UK, the surge in demand for cloud computing, AI-driven applications, and energy-efficient systems is driving the sector forward. With investments surpassing AED 216 billion since 2023 and an anticipated annual growth rate of 14% through 2030, the industry is on a fast track. However, limitations in grid infrastructure have prompted investments in on-site power generation and battery storage to enhance energy reliability. Both regions are capitalising on technological progress and supportive government policies to strengthen their digital economies.
How are renewable energy solutions being used to power data centres in the Middle East and the UK?
Renewable energy is becoming a cornerstone in efforts to make data centres more environmentally friendly, both in the Middle East and the UK.
In the Middle East, particularly across the GCC region, the abundant sunlight makes solar power a natural choice. The region is also exploring innovative cooling methods powered by renewable energy sources. These solutions are critical for managing the challenges of the arid climate and the heavy reliance on desalinated water.
Meanwhile, in the UK, data centres are embracing renewable energy in various ways. This includes sourcing green energy directly, installing on-site solar panels or wind turbines, and implementing energy-efficient technologies. Many operators are also stepping up their sustainability game by introducing battery storage systems and earning certifications like LEED. These measures not only help meet environmental targets but also align with global ESG standards and regional goals for a more sustainable digital future.
What are the key challenges in expanding data centre capacity in the UK and the Middle East?
Expanding data centre capacity in both the UK and the Middle East comes with its own set of challenges, shaped by the unique circumstances of each region.
In the UK, the rapid expansion of data centres is driving up power demand, straining the existing energy infrastructure. This creates a pressing need to secure a reliable and steady energy supply, especially as the industry continues to grow. Another challenge is finding affordable power sources to sustain future development, which is becoming increasingly difficult as demand rises.
In the Middle East, the obstacles are more tied to climate and logistics. The arid environment means water availability for cooling systems is a major concern, with reliance on desalinated water adding further operational difficulties. On top of that, land ownership disputes and regulatory hurdles can make selecting sites and planning for the long term more complicated. The region’s push for sustainable energy solutions further complicates efforts to scale up data centre operations effectively.
