Frankfurt and London are hitting their growth limits, while Prague and Warsaw are attracting investors at a record pace. Data center colocation in Western Europe means mature markets with high costs, whereas Central Europe offers growth potential at a fraction of the price. Which region delivers a better return on investment? We compare costs, energy, regulations, and infrastructure—so you’ll know where to direct your capital.

The European data center colocation market is undergoing a tectonic shift. The traditional FLAPD hubs (Frankfurt, London, Amsterdam, Paris, and Dublin) have reached critical capacity, and investors are seeking alternatives. Central Europe offers a combination of stability, competitive pricing, and untapped potential—the question remains whether it can compensate for the advantages of the established Western European markets.

Costs and ROI—The Numbers That Truly Drive Data Center Colocation Decisions

Operating expenses are a key parameter in any investment decision. One rack in a Prague-based data center in Europe costs an average of $900 per month, while in Frankfurt the figure reaches $1,480. This 39% difference translates to savings of over $550,000 annually when operating just one hundred racks. The Total Cost of Ownership (TCO) in Central Europe is up to 42% lower than in Amsterdam, significantly shortening the return-on-investment period.

Western Europe, however, offers certainty. The FLAPD markets boast highly developed infrastructure where every detail runs like clockwork. Equinix, Digital Realty, and NTT Global Data Centers operate dozens of facilities with Tier III and IV certifications, guaranteeing 99.982% availability. Investing in colocation hosting in these locations means immediate access to a dense ecosystem of cloud providers, telecommunications operators, and financial institutions.

The tax environment further widens the gap between the two regions:

• The Czech Republic offers a 110% super-deduction on research and development expenses,
• while Poland guarantees a 5% corporate income tax rate for companies operating under the IP Box regime.

Western European countries, however, do not provide such financial incentives—Germany’s corporate tax hovers around 30%, while the UK’s reaches 25%. As a result, the ROI of projects in Central Europe exceeds the Western European average by 60–80%, significantly reshaping the economics of long-term investments.

Energy Infrastructure—Stability vs. Green Transformation

The availability and cost of electricity determine the viability of every data center in Europe. Central Europe offers an energy mix that combines stability with sustainability. The Czech Republic generates 40% of its electricity from nuclear sources, ensuring a consistent supply without the fluctuations typical of renewables. Poland invested 3.5 GW of installed capacity in wind energy in 2024, and electricity prices across the region remain 25–30% lower than in Germany or the Netherlands.

Western Europe faces a paradox—despite massive investments in green energy,it struggles with insufficient grid capacity. Dublin has effectively imposed a moratorium on new data centers due to power grid constraints, while London is not expected to have sufficient capacity for new developments until 2035. Frankfurt, Amsterdam, and Paris are responding to network congestion by raising connection fees, pushing operators to seek alternative locations on city outskirts or in rural areas.

The climate conditions of Central Europe represent a hidden competitive advantage. With an average annual temperature of 46–50°C, data centers can use free cooling for up to 75% of the year, reducing Power Usage Effectiveness (PUE) to below 1.3. In contrast, Western European facilities located in warmer regions reach a PUE of around 1.5, meaning 15% higher energy consumption for every watt of computing power. In the era of AI and high-performance computing, this difference represents a significant factor in operational budgets.

Tip: A detailed analysis of why investors are directing capital toward Central Europe can be found at https://timebusinessnews.com/why-central-europe-attracts-investors-the-colocation-data-center-boom/.

Regulation and Geopolitical Stability—Where Do Data Sleep More Safely

The legal framework is often an underestimated component of investment decision-making. Central Europe benefits from EU and NATO membership, which guarantees the harmonization of legal standards and investment protection according to Brussels regulations. GDPR applies equally in Prague and Frankfurt, and ISO 27001 security certifications undergo the same audit process. The absence of natural disasters—such as earthquakes, hurricanes, or floods—minimizes risks associated with unpredictable events.

Western Europe offers a longer history of regulatory stability. London, Frankfurt, and Amsterdam shaped the rules for the data center industry at a time when the eastern part of the continent was only beginning its EU accession. For investors seeking maximum predictability, these markets represent a safer choice—albeit at a higher price.

Geopolitical tensions along the EU’s eastern border raise concerns about the region’s long-term stability. However, this factor has so far had no measurable impact on data center investments—the number of new projects in Poland and the Czech Republic increased by 47% year over year.

Growth Potential and Future Outlook—Where the Market Is Heading

The saturation of Western European markets creates structural barriers to growth. The FLAPD region has reached capacity, with land prices soaring by tens of percent and power grids unable to absorb additional load without massive infrastructure investments. As a result, operators such as Vantage Data Centers, EdgeConneX, and AtlasEdge are actively expanding into secondary markets—namely, Central Europe.

The Central European region is experiencing a boom comparable to Silicon Valley twenty years ago. Microsoft has invested over $1 billion in Polish infrastructure, while Google announced $2 billion in new projects. Vantage Data Centers is entering the Warsaw market with a 64 MW campus—double the current capacity of the entire market.

With a population exceeding 287 million people, Central Europe represents a market that cannot be efficiently served solely from distant Western European locations. Latency below 15 milliseconds to most major European business hubs makes Prague and Warsaw ideal nodes for hybrid cloud architectures that connect central data centers with edge locations.

Comparison of Western and Central Europe for Data Center Colocation Investments

Where the Capital Is Heading

The investment wave is already in motion. Those betting on a late entry into the saturated FLAPD markets are paying a premium price for shrinking margins. Secure colocation in Central Europe is no longer a compromise—it’s becoming a strategic choice for companies seeking a combination of stability, cost efficiency, and growth potential in a region where digital transformation is only just gaining momentum.

Frequently Asked Questions

Why are data center investors moving away from Western European cities like London and Frankfurt?

Frankfurt and London, part of the traditional FLAPD hubs, have nearly reached their limits for new data center capacity. Land and power grids in these cities are often fully strained. This scarcity leads to much higher costs for development space and higher connection fees, limiting future growth potential for investors.

How much can a business save on costs by choosing colocation in Central Europe instead of Western Europe?

The Total Cost of Ownership (TCO) in Central Europe (like Prague) can be up to 42% lower than in a city like Amsterdam. For instance, the average monthly cost for one server rack in Prague is about $900, which is significantly lower than the $1,480 average in Frankfurt. This directly leads to major savings in operating expenses.

What are the main tax benefits for data center investors operating in countries like Poland and the Czech Republic?

Central European nations offer strong financial incentives to attract development. The Czech Republic allows a 110% super-deduction on research and development costs. Poland provides a special tax regime, called the IP Box, which can lower a company’s corporate income tax rate to just 5%.

Is the electrical grid in Central Europe reliable enough for major data center operations?

Yes, Central Europe offers a stable and secure energy mix. For example, the Czech Republic generates about 40% of its electricity from nuclear sources, which provides a consistent, non-fluctuating power supply. Electricity prices in the region are also generally 25 to 30% lower than in Germany or the Netherlands.

How do Central European climates help data centers be more energy efficient?

The cooler climate in Central Europe is a hidden competitive advantage for energy use. With cooler average yearly temperatures, data centers can use “free cooling” for up to 75% of the year. This helps significantly lower the Power Usage Effectiveness (PUE) below 1.3, meaning less energy is wasted.

Does the strong growth of data centers in Central Europe mean the region is less secure or stable?

Not at all. Central European countries are members of both the European Union and NATO, which guarantees the same high-level harmonization of legal standards and investment protections. The exact same GDPR and ISO 27001 security certifications apply equally to facilities in Prague as they do in Frankfurt.

What is the biggest trade-off when choosing a Central European location over a major Western European hub?

The main trade-off is often the immediate ecosystem density. Western European hubs like Frankfurt have decades-long, established ecosystems with immediate, dense access to many cloud providers, financial institutions, and telecommunication operators. Central Europe is rapidly growing, but these larger ecosystems are still catching up in scale.

Can Central European data centers handle the high speed needed for applications like hybrid cloud and AI?

Yes, they can. The major hubs in the region, such as Prague and Warsaw, are located centrally enough to achieve low latency. They can reach most major European business hubs with network speeds under 15 milliseconds. This makes them ideal and fast enough for supporting modern hybrid cloud architectures.

Does geopolitical uncertainty on the EU’s eastern border affect data center investments in Poland or the Czech Republic?

Despite some geopolitical tensions, these concerns have not had a measurable negative impact on investment in the core Central European countries. The number of new data center projects in Poland and the Czech Republic recently increased by 47% year-on-year, showing a strong belief in the region’s long-term stability.

What is the practical takeaway for a company deciding where to direct its capital for data center colocation?

If your company prioritizes lowering long-term operational expenses and getting a higher return on investment (ROI), Central Europe is the strategic choice. You should look for new facilities in markets like Warsaw that offer cost savings, sufficient land, and access to substantial new global tech investments.