Inside Infrastructure: Spotlight on Spain's data centre assets

Our previous blog post, Inside Infrastructure: The Push and Pull of Data Centres, explored the extraordinary momentum behind data centres as an asset class, driven by surging demand for cloud computing, AI, and digital infrastructure.

This week we zero in on the developments that are being seen in this asset class in Spain, as our team shines a spotlight on how their jurisdiction is rapidly emerging as a strategic hub for data centres, driven by its abundant renewable energy, favourable weather, advanced digital infrastructure, and geographic position as a bridge between Europe, Africa, and America. 

Spain as a strategic destination

The European Union has identified Spain as a key player in its continental digital strategy, ranking second among Member States for digital public services. At the national level, the implementation of the 2023-2030 National Energy and Climate Plan (PNIEC) positions Spain to become a frontrunner in the energy transition. With one of Europe’s largest renewable power portfolios – mainly solar and wind – Spain provides precisely what data centres demand: green, stable and cost-competitive energy.

The rapid expansion of renewable energy sources offers a unique opportunity for data centres to align naturally with Spain’s renewable profile. As flexible, large-scale consumers, data centres can absorb excess generation and help stabilise the grid, thus transforming an energy imbalance into a competitive advantage.  There are, however, challenges, with the key bottleneck lying not in generation capacity itself, but in securing timely grid access and connection – which is currently hindered by slow, inconsistent permitting and stringent limitations on network investment planning. To address these constraints, new regulations and a €13.59bn grid investment by 2030 aim to improve grid access for high-demand users, like data centres. For investors, early site selection near grid upgrade zones will offer a strategic edge to capitalize on Spain’s growing digital infrastructure market.

At the same time, Spain's geographical position enhances its strategic component. Madrid, Barcelona and Zaragoza sit at key nodes in the global digital economy, acting as a natural bridge between Europe, Africa and America – an advantage that is further strengthened by the country’s advanced digital connectivity infrastructure.

The market awakens

Madrid has positioned itself as the sixth European market in terms of data centre capacity, consolidating its recognition as one of the fastest-growing regions on the continent. SOCIMIs (REITs), traditionally focused on offices and shopping centres, are also reorienting their strategies towards this sector. Firms such as Merlin Properties have committed to a €2.4bn investment over the next four years to develop 274 MW of capacity in Madrid, Bilbao, Barcelona, and Lisbon, in partnership with US AI computing giant CoreWeave, which has selected the Iberian Peninsula as its strategic gateway for its Southern European strategy. 

This strategic shift is no coincidence. The data centres sector offers attractive investment prospects, marked by sustained growth in demand for data, enduring cash flow stability and the potential for higher returns than mature real assets – such as offices or motorways. Additionally, integration with renewable production facilities significantly lowers operating costs, adding to the sustainable profile of the asset.

While prime yields remain compressed, these are expected to improve following adjustment to the new macroeconomic environment. As of today, these returns become especially attractive when paired with stability and creditworthiness of top-tier technology tenants, as well as the forecasted sector growth. An early entry into this segment could effectively secure stable and attractive long-term returns.

A pioneering regulatory approach

From a legal perspective, Spain also demonstrates remarkable potential to become the European hub for green digital infrastructure, reinforcing the value proposition for data centres as key grid-stabilising assets. 

Specifically, the publication of the draft Royal Decree regulating energy efficiency and sustainability for data centres has the ambition to consolidate energy efficiency and sustainability obligations into a single piece of legislation, providing greater predictability and facilitating regulatory compliance. Beyond its environmental goals, the draft Royal Decree highlights its social and economic benefits, aiming to generate local employment, boost regional development, and reinforce Spain’s leadership in sustainable digital infrastructure.

Spain's novel and ambitious regulatory framework has the potential to position the country as a pioneer in sustainable data centre development, setting standards that could define a new European benchmark. In this regard, the draft Royal Decree conditions access to the electrical grid on prior compliance with environmental and energy efficiency commitments, such as residual heat reutilisation, which represents an innovative approach designed to promote projects that uphold sustainability goals but also contribute to grid flexibility and resilience. However, this pioneering stance has attracted scrutiny from industry stakeholders who argue that some of these requirements, which go beyond the provision of the EU Regulations (Directive (UE) 2023/1791 and Commission Delegated Regulation 2024/1364) absent elsewhere in the European Union and which are still lacking detailed implementation guidance, may impose administrative burdens on investors compared to competing jurisdictions. The final Royal Decree should turn this criticism into clear, workable standards to safeguard Spain’s competitiveness while serving as model for Europe’s sustainable digital infrastructure, where data centres play an active role in advancing the energy transition.

The time to act is now

The economic stakes are significant: Spain could attract a substantial amount of investment in the coming years with a regulatory framework that transforms former liabilities into opportunities. Installed capacity in data centres currently stands at less than 400 MW and is expected to reach around 2,500 MW by 2030, which could represent tens of billions of euros in investment. This regulatory approach could soon position Spain as one of the most forward-thinking regulated markets where sustainability standards coexist with regulatory clarity, appealing not only to ESG-conscious investors but to any capital seeking stable, long-term returns in critical digital infrastructure.

The European digital future is being built today, and Spain has the cards to play a leading role.

And finally, Real Asset or Fake News?

Congratulations to those of you who did not board last week’s hydrogen-powered night train… this week we stay in Spain, focusing on some impressive insights into the country’s infrastructure. Can you spot the fiction amongst the facts? 

Storing sunshine: There are over 20 pumped storage hydropower plants located in Spain, using surplus renewably generated electricity to pump water uphill — effectively storing power for nighttime use.

Miles of Metro: Madrid’s Metro network is one of the world’s largest; if every tunnel were placed in a single line, it would reach well into Portugal — nearly to Lisbon, over 300 km away.

Green Canaries: The Canary Islands run almost entirely on wind and water  - a hybrid system links wind turbines and a mountain reservoir to provide nearly 100% renewable electricity, a pioneering project globally recognised for its self‑sufficiency.

Orange highway: A 30‑kilometre underground conveyor belt has been constructed between Madrid and Valencia to transport fresh oranges directly from the coast to the capital’s markets every morning, reducing truck emissions by 90%.

Stop, Go! Regenerative braking systems on Spain’s AVE trains recover energy and feed it back into the grid — enough to supply several thousand homes per year.

The answer will be revealed in next week’s post, but if you can’t wait until then please reach out and let us know what you think.