Data Centers in Frankfurt Region Drive Economic Growth, Study Finds

The Frankfurt metropolitan area, including the wider Rhine-Main region, has solidified its role as a key digital hub in Europe. Recent research conducted by the German Economic Institute (IW Consult) in collaboration with consulting firm Detecon, commissioned by the eco Association of the Internet Industry, highlights the significant economic contribution made by the local data center sector.

According to the study, the data center industry in Frankfurt has seen remarkable growth over the past five years, with its gross domestic product (GDP) contribution doubling. In contrast, the overall economy in the region expanded by approximately 16 percent during the same period. Projections suggest that this upward trajectory will continue, with the sector's GDP expected to increase by an estimated 175 percent over the next five years.

The impact of data centers extends beyond their operators. For every euro generated by these facilities, an additional 51 cents in economic output is realized, with 24 cents of this directly benefiting the region. In 2023 alone, the industry produced a total tax revenue of around 405 million euros, with the majority attributed to the data center operators themselves and their suppliers. Approximately ten percent of this tax revenue remained within local municipalities, primarily through business taxation.

The study also identifies significant secondary effects for user industries. Companies utilizing data center infrastructure demonstrated higher levels of innovation, generating roughly 18 percent of their revenue from new products or services, compared to just 8 percent for firms not leveraging such facilities. This innovation advantage is further amplified by the accelerating adoption of artificial intelligence (AI), which requires substantial computing power and high-speed network connectivity.

Frankfurt's role as a digital epicenter is further strengthened by the presence of DE-CIX, the world's largest internet exchange point. This concentration of digital infrastructure attracts both domestic and international enterprises, which collectively invest at least two billion euros annually into the region's digital backbone.

Despite its robust expansion, the data center industry in Frankfurt faces mounting challenges. The study highlights critical issues including high energy costs, lengthy approval processes, regulatory uncertainty, and a lack of available land for new facilities. One of the most pressing concerns is the secure supply of electricity. The rapid growth in demand, especially driven by AI applications, is placing increasing strain on the region's power grid. Industry observers warn that the energy requirements of modern data centers rival those of large cities, and future, AI-centric facilities are expected to demand even greater energy resources.

This escalating demand raises concerns about the availability of sufficient short-term power capacity, which could undermine the region's attractiveness as a location for data centers. As a result, there is a risk that operators may consider relocating to other European countries offering more favorable conditions, such as Scandinavian nations with lower energy prices and more streamlined network access.

Industry representatives advocate for stronger political and municipal support to preserve Frankfurt's position as a leading digital infrastructure hub. Key recommendations include ensuring affordable electricity and accelerating approval processes to foster sustained growth. Maintaining the strength of this sector is considered vital for the continued digitalization of the economy, both regionally and nationally.