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Whilst there are many types of data centres, broadly they are physical facilities of computing and networking hardware, such as servers and data storage drivers. The main purposes of data centres is to collect, process, store and transfer data.
Companies rely on data centres to build and run their business and to deliver their applications and services. This may be allowing users to send emails, stream a movie, or transfer money via online banking. Beyond output, data centres are also used to store large volumes of important data; typically data used in the daily operations of a business. The main advantage for businesses is that data is centralised and can be accessed anywhere in the world. Data centres also store data for governments, financial services, healthcare and a myriad of other sectors.
Globalisation and remote working increased the demand for cloud storage which was created in the early 2000s. Since then, increases in e-commerce, streaming and a general change in how consumers and businesses access their data further strengthened reliance on data centres. However, the surge in AI further solidified the importance of data centres and consequently 70% of new data centre space, power, and equipment is currently being built to fulfil the demands of AI (the use and training of AI).
As AI, cloud computing and digital services continue to grow, capital is being poured into the development of data centres, generating significant workstreams for commercial law firms. Across the next 2 years, Amazon, Google, Meta and Microsoft are expected to spend $1.5 trillion building data centres. It is expected that global spending on data centres will surpass $1 trillion by 2030, with McKinsey & Company estimating that this could potentially reach $7 trillion.
However, this rapid growth does not come without its concerns. Electricity consumption for data centres worldwide is projected to grow 26% in 2026. Water is another key concern; large data centres can consume up to 5 million gallons per day.
The UK currently has 520 data centres – it is the largest data centre market in Western Europe. It is an ideal market for data centres due to its cool climate, reliable energy, strong data protection laws and an experienced data centre focused workforce. As such, currently the UK is an attractive market for investment.
Data centres are a particularly attractive market for full-service business law firms as legal issues arise in real estate, corporate, finance, regulation, litigation and commercial contracts. Therefore, firms can generate profit in multiple practice groups and encourages firm collaboration between the practice groups. Additionally, international law firms can capitalise on the projected $1trillion global market by leveraging their expertise into other jurisdictions such as the EU especially as the European Commission’s AI Continent Action Plan plans to triple data centre capacity in the EU in the next five to seven years.
There are particular real estate nuances with data centres; local authorities are required to consider the need for data centres when setting local policies and deciding planning applications. Therefore, it is important to instruct sector specific real estate lawyers who can assist with the initial site acquisition (this may involve corporate if the data centre is being acquired through an acquisition and/or the finance team to ensure any development or acquisition is fully funded and executed efficiently. A particular example of financing could be via private equity which invested $108 billion into data centres in 2024). Further to the acquisition, lawyers should be present during the planning and construction of a data centre.
The UK acknowledges the importance of data centres to economic activity and public services. The Cyber Security and Resilience (Network and Information Systems) Bill (NIS 2) will class data centres as essential services. NIS 2 will also introduce regulatory duties for operators of UK data centres above capacity thresholds, to notify Ofcom, implement proportionate security and resilience measures, and report significant incidents. The main purpose of NIS 2 is to oversee and support the data centre sector but also to ensure consistent protection and enable secure growth in the UK.
NIS 2 is predicted to receive royal assent this year, therefore clients may need advice on NIS 2 regulation, reporting and audit requirements, general GDPR compliance, the Climate Change Levy along with advisory work regarding Ofcom Regulations and where applicable ICO guidelines.
Despite the boom and acknowledgement of the economic prosperity of data centres, they do pose a significant threat to the UK. Future regulation may be introduced to regulate their use of electricity and water as it is predicted that by 2030, data centres will consume around 10% of the UK’s electricity. Data centres will need advisory work from law firms that sets out how they comply with future regulation.
Contracts are integral to the smooth running of any data centre. Some important contracts include telecommunications contracts, equipment purchase and lease agreements, and cloud outsourcing arrangements. It is integral that all contracts set out clear and deliverable terms and that all the terms mitigate risks to the client.
Operationally, data centres require electricity, fibre connectivity (subject to grid constraints) and water usage contracts to provide power to the IT systems and provide sustainable cooling thresholds. Lawyers play an important role in the tender process, negotiation and completion of contracts with third-party providers. Litigation lawyers may get involved if contracts are breached, supply chains are disrupted, there is a cybersecurity breach, planning dispute or contractual disputes over energy supply.
Many major UK data centre operators have committed to achieving voluntary sustainability targets by 2030. They support renewables projects through power purchase agreements (PPAs). These long term agreements between energy providers and data centres will need to be drafted and negotiated by lawyers to ensure the data centre receives the amount of energy they require, at a reasonable price.
The types of question that could arise in a commercial law interview in this area are, for example:
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