Demand for data centers in the MENA region on the rise

19 February 2024 Consultancy-me.com 3 min. read

The Middle East is expecting significant growth in the data center sector, driven by increased internet access and a massive uptick in digital adoption. That is according to a report from Knight Frank, which also highlights the growing potential for investment opportunities.

The growth potential for data centers in the MENA region is clear to see. Digital infrastructure is becoming crucial to support some of the major societal shifts being pursued, and it is a growing opportunity for both existing and new data center providers to develop state-of-the-art facilities.

“When asked about the potential for data center growth in the Middle East and North African markets, my answer is simple. It is not a case of if but when. The reason? The foundations are in place,” said Stephen Beard, co-head of global data centers at Knight Frank.

UAE Data supply

Demand for data centers in the MENA region on the rise

The UAE

The UAE is currently home to the largest concentration of data centers in the Middle East. Kazna Data Centers, the largest in the Emirates with a 46% market share, has a relatively high live IT capacity. Gulf Data Hub is the second largest data center operator in the UAE, controlling 26% of the market.

Despite long being closed off to foreign involvement and run exclusively by local companies, data centers in the UAE are now more open to foreign direct investment and foreign-linked M&A activity. That is partly due to a 2020 law that allows foreign companies to own majority stakes in UAE companies.

Saudi Arabia

As for Saudi Arabia: the Kingdom comes second in market share to the UAE, but it is the fastest-growing data center market in the Middle East. Like in the UAE, the Saudi market is dominated by local players, like Center3 (backed by Saudi Telecom Company), with 23% of the market share.

Outside players are however increasingly getting into the market: Huawei, for example, is planning to open a cloud data center in Riyadh in 2024 with the aim to provide cloud services for driving AI adoption.

Share of data companies in Saudi Arabia

Demand for data centers in the MENA region on the rise

The announcement of a new Google Cloud region in Saudi Arabia was a huge positive development for the country’s digital sector. The service, which will provide proprietary cloud computing and data analytics services to local companies, is expected to bring in about $109 billion to the Saudi economy.

Other big MENA players have also made a foray into the data center industry in recent years: Israel, and to a lesser extent Morocco and Egypt, have build up significant telecommunications and IT sectors. The tech industry accounts for 18% of Israel’s GDP, almost half of the country’s exports, and around 30% of its tax revenue.

Diversification of the MENA economies

It is no surprise why countries like Saudi Arabia and the UAE are massively investing in digitalization and technology, among other non-oil sectors. These countries, long hyper-reliant on fossil fuels, have been making big moves to diversify their economies in recent years – and in a hurry. Both countries have also set ambitious goals to reach net zero in the coming decades.

“Digital transformation presents considerable prospects for economic diversification, better educational access and increased connectivity across the region. In partnership, government-led initiatives, private-sector investments and global cooperation will help optimize the region's potential,” said Beard.