Riyadh to dominate Middle East data centre growth with 37pc CAGR by 2027

RIYADH: Saudi Arabia’s initiatives to digitise its economy and establish itself as a hub for artificial intelligence are likely to position Riyadh as the leading market for data centre growth in the Middle East over the next three years, according to a report by real estate services firm Jones Lang LaSalle Inc.

The analysis shared with Bloomberg indicates that Riyadh is expected to expand its data centre capacity, measured in megawatts, at an impressive compound annual growth rate of 37 percent through 2027. This figure is nearly double the projections for nearby Dubai and Abu Dhabi, and significantly exceeds the global estimate of 15 percent.

Daniel Thorpe, the EMEA data centre research head at JLL, highlighted in an interview that there is a significant momentum toward digital transformation aimed at making Saudi Arabia an AI powerhouse. He also underscored the supportive government policies that are fostering a thriving market for data centres.

In pursuit of establishing itself as a centre for AI, technology, and innovation, Saudi Arabia is rapidly advancing its cloud infrastructure and data centres as part of its broader economic diversification efforts.

The demand for data has surged as numerous industries emerge and many companies choose to set their headquarters in Riyadh. Major players such as Microsoft Corp., Amazon’s cloud division, and Equinix Inc. have committed to enhancing data centre capabilities in Saudi Arabia.

Additionally, the US startup Groq Inc. has formed a partnership with oil giant Aramco to create an AI inferencing centre. JLL noted that investment has been bolstered by tax incentives, economic free zones, and initiatives aimed at promoting data sovereignty.

Furthermore, Saudi Arabia is poised to launch a new AI project backed by an investment of up to $100 billion, which is partly dedicated to the development of additional data centres and will compete with the efforts to establish an AI hub in the United Arab Emirates, as reported by Bloomberg.

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However, it is important to note that some of the kingdom’s ambitious growth plans are being affected by US government restrictions on the export of advanced AI chips, a challenge that the UAE has also encountered.

In the broader Middle Eastern context, the data centre market is currently estimated to be valued at around $6 billion, with the UAE leading the region in terms of data centre capacity, followed closely by Saudi Arabia.

The kingdom’s sizable population of approximately 35 million and its commitment to advancing AI and technology place it in a strong position to rapidly become the regional leader, according to insights from the consultancy firm The Proptech Connection.

A managing partner from Proptech noted that Saudi Arabia exhibits a “strong conviction” and the “ability to deploy resources,” which could enable it to navigate challenges such as rising energy costs and the complexities associated with scaling data centre construction. He concluded that the kingdom possesses both the ambition and the capital necessary to take the lead in this sector.