Digital transformation is driving unprecedented demand for modern data centres. As investors, we are witnessing remarkable growth in this asset class. Today, data centres form the backbone of the global data-driven economy.
We consider them a safe haven for capital in an increasingly volatile environment. This segment is expanding significantly faster than traditional office or retail real estate.
In this article, we analyse the differences between the Polish and German markets.
Our focus is on two key models: colocation and build-to-suit (BTS). We explain how transaction structures directly influence achievable returns. Understanding these mechanisms enables more strategic and risk-adjusted portfolio management.
Operational Differences: Colocation vs. Build-to-Suit
The colocation model is based on leasing space to multiple independent clients. Operators provide infrastructure, cooling systems, and the highest levels of physical security.
Tenant diversification generates stable and predictable cash flows.
By contrast, the build-to-suit model operates under a fundamentally different structure. In this case, the facility is designed and constructed to meet the specific requirements of a single large technology company.
Tenants typically sign long-term leases of 15 to 20 years. This significantly reduces vacancy risk and lowers operational management complexity.
Institutional investors value both approaches for their distinct market characteristics. The choice of strategy primarily depends on the investor’s risk tolerance.
Both models, however, require substantial upfront capital investment.
Stability and Lower Yields in the German Market
Germany – particularly Frankfurt – represents the core of Europe’s data centre market. The maturity of this market is directly reflected in yield levels.
Prime yields for top-tier colocation assets currently range between 3.5% and 4.5%. Investors accept lower returns in exchange for maximum capital preservation.
Germany offers:
- Strong regulatory stability
- Legal certainty
- Excellent international connectivity
Cloud demand continues to significantly exceed supply. Competition among institutional funds for available assets remains intense.
High energy costs represent an operational challenge. Nevertheless, the financial strength of tenants justifies the lower yield levels.
We anticipate further yield compression in established German core markets.
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Poland as an Emerging Data Hub in Europe
Poland is rapidly evolving into a key data hub in Central and Eastern Europe. Warsaw is attracting major global technology players at an accelerated pace.
Compared to Germany, the Polish market currently offers significantly higher returns. Yields typically range between 5.5% and 7%.
This risk premium attracts capital from the United States and Asia. Companies such as Google and Microsoft have already invested billions of dollars in the country.
The market is gradually shifting from speculative developments toward large-scale BTS agreements.
The main barrier remains access to sufficient grid connection capacity. At the same time, we observe a gradual convergence between Polish and German yield levels.
This convergence reflects growing investor confidence in the Polish real estate market.
ESG and Energy Availability as Key Return Drivers
Access to renewable energy has become a decisive success factor in data centre transactions.
ESG criteria now directly influence achievable yields. Sustainable and energy-efficient facilities command pricing premiums.
Investors prioritise:
- Sustainability certifications
- Energy efficiency
- Future-proof building design
Germany leads in the integration of renewable energy in large-scale data centres.
Poland, on the other hand, faces the challenge of accelerating the decarbonisation of its national energy grid.
Technological obsolescence is a critical risk factor. Buildings must therefore be designed with flexibility and scalability in mind.
Only modern, adaptable data centres will maintain long-term value.
Conclusion
Colocation offers diversification and stable cash flow.
Build-to-suit provides long-term income secured by high-credit anchor tenants.
Germany represents stability and lower yields.
Poland offers higher returns combined with rapidly increasing market sophistication.
For investors, a differentiated analysis of market maturity, location, energy availability and ESG compliance is essential.
Sources:
- Savills: European Data Centres Report 2024 – https://www.savills.com
- Knight Frank: Data Centres Global Report 2024 – https://www.knightfrank.com
- CBRE:European Data Centre Solutions Q3 2024 –https://www.cbre.com
