People around the world have logged tens of billions of hours on Zoom, Netflix and all kinds of other online applications at home over the past 18 months.

But a mass decampment to the online world requires a lot of space in the physical world. That means data centers. These buildings and warehouses store data and various critical applications used by companies of various sizes, and it's not just the major tech giants.

They are not noted for their beauty or individuality, packed as they are with rows of computers, servers, processors and routers. But they are needed more than ever as more and more economic life moves online.

All around the world, demand for data centers is booming. The US data center market is predicted to grow by 14% in 2021 in terms of megawatt capacity, according to CBRE, a real estate consultancy. India is experiencing a huge rise in data center demand, with internet usage growing rapidly among the country's 1.4 billion people.

In Europe, the market is growing especially fast. The first quarter of 2021 was unprecedented in terms of the take-up of leased data center space, much of it for centers still in the construction phase.

"The sector has been on a phenomenal growth trajectory since 2016," Andrew Jay, head of Data Center Solutions at CBRE told DW.

"Despite some short-term construction delays at the start, the pandemic has accelerated the data center supply growth."

Energy and water concerns

The need for more data storage space is not going to let up. Internet of Things (IoT) technology, such as self-driving cars, and a rapidly rising demand for cloud computing services across various sectors are driving up the value of the market.

On top of that, the pandemic accelerated many preexisting trends such as remote working and e-commerce. The increasing digitalization of the global economy helps to explain why data centers have become so important.

Yet the environmental impact of data centers has attracted scrutiny. According to the International Energy Agency, data centers currently account for around 1% of global electricity use.

Data centers also use huge quantities of water to keep the facilities cool. That has led to controversy in the US, where companies like Google and Amazon are using billions of gallons of water.

George Kamiya, an energy analyst at the International Energy Agency, says water efficiency is an area where the data center sector "can certainly do more", along with decarbonizing supply chains, reducing e-waste, and developing even more energy-efficient technologies.

However, he points out that the industry has made big strides in terms of overall energy efficiency in the last decade.

"Overall energy use by data centers has been roughly flat, while global internet traffic grew twelvefold over the same period," he told DW. "Some of the big data center operators are also some of the biggest buyers of renewable energy, which helps to mitigate the overall carbon footprint of data centers."

He is not convinced by arguments that a mass switch to home working or online meetings will make a major difference in emissions overall, through any reduction in travel or commuting.

"The short answer is, we don't know," he says. "It's actually very difficult to estimate the net effect of increasing digitalization."

He points to the fact that remote working could reduce energy use from commuting but may lead to more energy use at home. Some teleworkers may choose to move to rural areas, meaning more carbon-intensive housing and transport over the longer term.

European growth powers ahead

Controversy aside, right now data centers are being built in large quantities all across Europe.

Several US data center companies, such as CyrusOne and Vantage, have invested heavily in Europe. Vantage is currently developing large data center campuses in various European cities, including at Ludwigsfelde, just outside Berlin.

While tech giants such as Google, Amazon and Microsoft are noted for their own "hyperscale" data centers, a major chunk of the European market is taken up with these so-called "colocation" data centers, which are managed by specialist data center management companies and leased out to various enterprises.

According to Jay, the widespread adoption of cloud computing is driving data center growth in Europe. He says that much of the recent growth (80-90%) is driven by end users of hyperscale cloud service providers such as Google, Amazon and Microsoft.

However, so-called "retail colocation", where smaller companies use a shared facility also continues to grow. "Enterprises are furthering their digital transformation post-COVID, working with managed service providers and others to deploy for a post-COVID working environment," says Jay.

According to DCP, a consultancy, revenues accrued from European data centers will rise to around €15 billion by 2024, an increase of 46% from 2020.

The traditional hot spots for data centers in Europe are known as the FLAP markets (Frankfurt, London, Amsterdam and Paris). But Dublin is also popping up increasingly. Jay says other markets are growing fast, including Berlin, where demand for hyperscale cloud computing services is changing the dynamic.

"Microsoft launched its first region in Berlin in 2019 citing customers for its sovereign German cloud solution," he says. "AWS (Amazon), Apple and others use Berlin as an edge or connectivity location, and we suspect over time to see these providers expand their footprint in this market."