Retail real estate in transition: from shop floors to server halls?
As retail space is repriced, some sites are being reconsidered for an entirely different use. Why power, not location, is now the key to value, and how Frankfurt and Sweden show both sides of it.
Retail property has gone through one of the deepest repricings in commercial real estate. Higher interest rates, online shopping and changing consumer habits have hit secondary shopping centres and out-of-town retail hardest. Prime destinations with strong tenant mixes have held up, but much of the rest of the market is looking for a new purpose.
At the same time, demand for data centres is rising across Europe, driven by cloud computing and AI. That raises an obvious question: can struggling retail assets become part of the digital infrastructure boom?
Why retail sites are on the radar
Large retail boxes and retail parks share some features data centre developers look for: big floorplates, simple structures, heavy-goods access, generous land and locations near motorways and urban areas. In some cases, they also have meaningful existing grid connections.
That last point matters most. In today’s market, the most valuable feature of a site is often not its location or its building, but its access to power.
Frankfurt: demand is there, power is not
Frankfurt is Germany’s leading data centre hub and one of the largest in Europe, thanks to its network connectivity and low latency. But power has become the limiting factor. Industry voices describe energy as the biggest constraint on growth, and one operator reported being told to wait up to ten years for a new power connection in the city. Developers are increasingly building outside the city instead.
Repurposing existing buildings is one response. German landlord Aroundtown has announced plans to convert parts of its office portfolio into data centres and has secured a conversion permit in Frankfurt, but the power supply still needs separate approval. Elsewhere, a former logistics facility in Warsaw has been converted into a data centre scaling up to 65 MW.
The lesson for retail owners is clear. Conversion potential depends far less on the building than on whether the grid can deliver the power required. Most retail sites have connections designed for shops, not for tens of megawatts. Where a site does have spare capacity, or a credible path to it, that capacity carries real option value.
Sweden: power is there, demand is further away
Northern Sweden offers the opposite profile. Low power prices, largely renewable hydropower, a cool climate and available land have made the Nordics a magnet for large-scale data centre investment. Bloomberg Intelligence projects that Nordic data centre power demand could quadruple by 2032.
The trade-off is distance from end users. That makes the region well suited to workloads where latency matters less, such as AI model training and high-performance computing, rather than services that need to sit close to customers.
Here, the opportunity is less about converting old retail units and more about land, power and new-build campuses. For investors, it is a different risk profile entirely.
What it means for retail investors
Data centre conversion will not be the answer for most struggling retail assets. But the shift changes how retail sites should be valued:
Power is an asset. Grid capacity, and the ability to expand it, should be assessed alongside rent and tenant covenant.
Alternative use sets the floor. When income is uncertain, the value of the site for logistics, residential or digital infrastructure can underpin pricing.
Location means different things for different uses. A site close to a city matters for low-latency data services. Cheap power matters more for large-scale computing.
How AI CoVal approaches it
When we score retail assets, we look beyond current income to repositioning potential and alternative use value, including site size, access and infrastructure. That helps investors see where a discounted asset has a credible second life, and where it does not.
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Not financial advice. Do your own due diligence.
