Data centres in the Middle East & North Africa: Strategies for market entry and gaining a competitive edge

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The last 12 months represent an inflexion point for the MENA region’s data centre market. Investment has sky-rocketed, and the window of opportunity to be an early mover in the region is rapidly closing. In this article, we evaluate successful strategies & propositions for operators, developers, and investors, and make market-specific strategic recommendations.

When it comes to hosting services and data centre infrastructure, the MENA region is characterised by diversity between markets: from tier 1 markets in the GCC already serving hyperscale service providers and global enterprises, to markets with all the ingredients for rapid digital transformation, but a data centre sector yet to really take off. Regional capacity and new investment activity are both heavily concentrated on Saudi Arabia and the UAE, with regional providers such as Khazna and Gulf Data Hub leading the way in offering local hosting solutions, alongside global data centre operators (such as Equinix) and the hyperscalers. By 2026, AWS, Microsoft Azure, Google Cloud and Oracle Cloud will all have a presence in Saudi Arabia, unlocking a strategic regional location with excellent connectivity through which to serve the wider Middle East region, increasing the hosting options available for enterprises and service providers, and narrowing the window of opportunity for regional colocation players.

Data centre operators, developers and investors focusing on these tier 1 markets must:

• Create strategies and propositions which differentiate your facilities in an increasingly crowded market, focusing on specific segments of customer demand such as:

Secure facilities sensitive industries (eg government and defence).

Highly-connected, strategically located facilities for low latency metro workloads (eg financial institutions looking to engage with the growing regional stock exchanges).

High-capacity sites for local software & AI innovation where infrastructure configurability, access to inexpensive power and security are key.

• Evaluate demand and engage prospective customers early. Don’t assume that if you build capacity, customers will come. Capacity is not a standardised commodity in the eyes of your customers, you must understand the drivers of your customer segment’s procurement.

• Build an ecosystem – whether that’s channel partners, vertically integrated joint propositions, or anchor customer partners, now is the time to secure the partnerships that will realise a leading return on investment. Given the digital acceleration in the region, these partnership opportunities are shrinking by the day.

However, investment is not limited to these regional tier 1 markets, and no investment is as informative on this trend as Ooredoo’s $550 million-dollar financing deal with the Qatari National Bank (QNB) to develop their regional data centre operations across Qatar, Kuwait, Oman, Iraq, and Tunisia, a move which is in lockstep with their subsea cable investments across the region (2Africa, Fiber in Gulf). Similarly, Gulf Data Hub are targeting expansion from their base in tier 1 markets into Qatar, Kuwait, Oman and Bahrain, with backing from US-based private equity firm KKR to deliver on this strategy a promising sign of future demand projections across these tier 2 markets. Such markets will quickly become crowded, and prospective developers and investors should act now to define targeted market entry strategies and propositions, as it is not just these regional players looking to enter these markets. Take Oman, where in November Equinix and Omantel opened their new 125 rack site in Salalah, collocated with a subsea landing station and managed by Equinix as an IXP. These tier 2 markets will increasingly become the battleground of national, regional and global players, as they jostle for market share with a backdrop of rapid capacity expansion and dynamic local demand in line with local digital transformation.

Lastly, tier 3 markets should not be forgotten about. While they are largely nascent in terms of capacity, and current demand for this capacity, the low barriers to entry for software innovation means there are fledgling developer communities in countries across the region, and this will give rise to meaningful digital transformation over the next decade. Currently, in countries such a Libya, there is significant, and growing, data egress into regional countries where reliable hosting services can be found, in Libya’s instance hosting demand is being met by supply in Italy.

Data centre developers and investors focused on these emerging tier 2/3 markets should aim to:

• Partner to ensure smooth market entry – leading local technology companies, such as telecoms operators, will be crucial to ensure the local market nuances are understood, both across expected future demand and knowledge of the local skills, regulations and connectivity constraints, all of which are crucial to a successful facility build.
• Engage the local regulator early, to help shape the local regulatory landscape, and ensure that regulatory development post-investment does not add significant costs to the build.
• Engage the local power sector to evaluate options for an uninterruptible power supply (UPS), and prioritise colocation with power generation to facilitate UPS if needed – reliability and uptime are likely to be key challenges for in-country data centres versus their international hosting competitors.
• Stimulate local hosting demand, through partnering with local ‘big names’ as anchor customers and promoting these partnerships – government is a great option for this if feasible to demonstrate to local enterprises the benefits of colocation or hosting through a cloud service provider, and work past any cultural blockers to adoption which are common in early movers’ cloud migrations

In the remainder of this article, we dive into the nuances of four segments of the MENA region, looking at existing and planned data centre facilities, recent news and investments, and our future predictions for each market – starting with the market leaders in the UAE and Saudi Arabia.

Figure 1: Over 75% of MENA’s data centre capacity is concentrated is 5 GCC markets

The UAE seeks to maintain position as regional market leader

The UAE market is rapidly growing: Khazna expects the nation’s capacity to nearly double by 2029. In 2024 the UAE data centre market accounted for 29% of the total white floor area added by data centre operators in the Middle East – the largest share of any country in the region, and in line with the government’s ambitious growth goals. Khazna currently hold the highest market share in the national co-location market, however several other regional operators, such as Gulf Data Hub, Moro Hub and DU (who recently partnered with Oracle in the development of a sovereign cloud platform) compete in the market. When it comes to the hyperscalers, Microsoft, Oracle and AWS all have regions based in the UAE.

The biggest news in the last few months has been Khazna’s plan to build the largest data centre in the UAE, with a planned 100MW capacity to become operational in Q3 2025. Indeed, scale is the order of the day in the UAE, with “the world’s largest green data centre”, the Moro Hub green data centre, having recently entered its second phase of ten in its development. The project is aiming to attain a 100 MW capacity and is projected to cover 100,000 square meters by completion, entirely supplied by sustainable energy sources. Gulf Data Hub, another regional data centre operator, recently announced a deal with KKR for a $5billion investment to build-out its data centre capacity across the region. Oracle’s recent announcement of a to five-fold increase in investment in the Abu Dhabi emirate is indicative of the wider investment landscape for the gulf nation, with Oracle’s regional lead quoted saying “five years ago would have been different. Now it’s a huge market”.

The UAE once possessed significant regional dominance in the MENA data centre market, a position which is increasingly under threat from the extensive investment into facilities in Saudi Arabia. While Saudi Arabia’s significant advantage on land, population and access to energy may lead to erosion of the UAE’s capacity advantage, the UAE must focus on its position as an innovation hub, attracting global businesses and acting as a regional fulcrum for the cutting edge of digital industries, through targeting regional spending on attracting AI innovators through accessible high performance compute (HPC) and data centre labs. With the world’s largest green data centre in the world and an ambitious 2050 net-zero target, the UAE can also differentiate versus it’s neighbour on sustainability, and other non-capacity differentiators.

Key questions for operators, developers, suppliers and investors in the UAE include…

• How can the UAE partner with Europe to compete with the US and China in hosting premium high performance computing (HPC) workloads, such as AI training?
• How can operators and suppliers retain regional leadership in light of a rapidly accelerating Saudi market?
• How can developers looking to build in the UAE learn from global case studies of true facility innovation (eg Deep Green)?
• Who are the leading suppliers navigating unique regional challenges such as cooling?

Saudi Arabia seeks capacity leadership with rapid investment

Saudi Arabia is another rapidly growing market, recently turbo-charged by Vision 2030’s aim to surpass 1,300 MW of capacity by 2030 alongside a planned $18 billion investment in the market. The country currently has 440MW in capacity, and as of 2024, the top five companies occupied approximately 61% of the market, with Mobily (Etihad Etisalat company) leading the way with around 168 MW of capacity spread across 8 data centres, and are not stopping there, with a recent announcement of an additional almost $1 billion in data centre investments. Other key players in the Saudi data centre market include stc, GO and HostGee. However, investment from major global hosting players is threatening to shake up the Saudi market, with AWS and Microsoft currently building facilities in the country to enable market entry in the coming years.

Google is currently the only US-based hyperscale rot have launched in Saudi, partnering with Aramco to launch a local cloud region in November 2023, based out of Dammam. However, their global cloud competitors are close behind int heir attempts to tap into this rapidly accelerating digital economy. Firstly, AWS is set to launch a cloud region in Saudi Arabia in 2026, with plans to invest $5.3 billion a signal of their expectations of significant future regional hosting demand. Local businesses are already using AWS through a CloudFront Edge location in Jeddah, demonstrating the local demand exists for such services, and indicating that local enterprises are increasingly comfortable with third-party hosting options. Similarly, Microsoft is developing a cloud region in Saudi Arabia and recently completed construction of the data centres in December 2024.

Away from the hyperscalers, Pure Data Centres has formed a joint venture with Dune Vaults to develop hyperscaler campuses in Saudi Arabia, with plans to develop a more than 100MW of capacity. One of the most ambitious stories coming out of Saudi Arabia is from Oxagon, part of the wider Neom development, where talks are being held over 1GW AI data centre, as part of a broader $4 billion package of funding for the greenfield port city.

The Saudi Arabian Government currently has huge ambitions and see’s the digital economy (and the supporting digital infrastructure) as key to their transformative plans for the country. Conversations around potentially having 1GW capacity data centres shows exactly that. Many of the plans involve ideas around Smart cities and a increasingly developed Service economy, all of which will require increased data processing and storage capacity. One of the major challenges to data centre construction in Saudi Arabia, and for the wider Mena region is Cooling. However Saudi Arabia may have an unseen advantage. Due to limited amounts of water in the region, Saudi Arabia have heavily invested in Water Management. This means a substantial amount of infrastructure around water sources has already been developed, which could be a net benefit to construction of data centres requiring water cooling in the future.

Key questions for operators, developers, suppliers and investors in Saudi Arabia include…

• How will the arrival of hyperscalers impact the existing Saudi players that have enjoyed free reign in the kingdom up to now?
• How can Saudi compete with the UAE for regional leadership outside of pure capacity, looking at innovative facility models and encouraging investment from future global digital leaders?
• What innovative solutions are being supplied or piloted in order to overcome the unique challenges of development in Saudi Arabia?

The race to become the best of the rest in the Middle East has begun

While the UAE and Saudi Arabia are increasingly mature digital economies, the rest of the MENA region still has a significant way to go in their digital transformation. However, this transformation is well underway, and future increases in local hosting demand are inevitable. However, what remains to be seen is whether these emerging digital markets invest now to secure their digital sovereignty and accelerate digital transformation, or sit back and allow the regional front runners in the UAE and Saudi Arabia to capture the growing hosting demand originating in these tier 2 and 3 markets.

Indeed, many such markets are beginning to position themselves to compete for local demand, and that from adjacent countries who do not match their investment. Qatar and Bahrain both have a hyperscale presence, with Bahrain being the base of AWS’s first MENA cloud region, whilst in Doha, both Google and Microsoft have data centre regions. In Oman, the data centre market is predictably almost entirely focused on Muscat, and first movers have quickly established a presence in the country, such as Equinix alongside Omantel. Kuwait’s data centre market is predicted to almost double in value by 2029, and similar growth trajectories can be found for each of the aforementioned countries: Bahrain, Qatar and Oman.

One to watch in terms of a connected regional strategy for tier 2 markets is Ooredoo, who operate 26 data centres across Qatar, Kuwait, Oman, Iraq and Tunisia, and have plans to invest significantly in expanding this network of facilities. They have recently signed a 550-million-dollar financing deal to support its plans to expand its capacity to over 120 MW, most recently bolstered through their launch of a 10MW facility in Oman.

Strategies targeting a network of facilities across tier 2 markets is proving popular, with stc and Gulf Data Hub also announcing similar investment strategies into regional tier 2 markets. For example, stc recently announced plans for a 60 MW Bahrain data centre park during the inauguration of the 2 Africa pearl submarine cable system, and Qatar, as part of their desired positioning as a centre of interconnection in the region, recently announced that Ooredoo, in partnership with DE-CIX, it was establishing Qatar’s first standalone commercial internet exchange.

Key questions for operators, developers, suppliers and investors in the rest of the Middle East include…

• How can players in tier 2 markets compete with the vast monetary and resource investment in tier 1 market in the UAE and Saudi Arabia?
• How realistic are the hub aspirations of the smaller market players?
• What policies could/should governments pursue if they want to accelerate digital infrastructure growth while retaining sovereignty over critical national infrastructure?

North Africa has a unique opportunity to connect Europe, the Middle East and the growing African digital market

The North African data centre market is in its early stages, with national markets ranging from negligible to regionally prominent. Egypt is by far the biggest market in North Africa, with 14 data centres, almost all in the north of the country near to the major urban areas. Morocco, on the periphery of the MENA region, is also an interesting market to watch, with a projected $50 million of investment annually by 2028, although this pales in comparison with the leading MENA markets. Libya, Tunisia and Algeria are all in low single figures in number of facilities, with varying estimates below 5 facilities in each depending on the source.

As well as being the most mature local market today, Egypt is also regionally one to watch. The UAE-based Khazna is currently preparing to enter the local market through construction of a facility in Cairo, in a possible sign of a desire for Middle East based leading operators looking to expand into North Africa, with Tunisia on Ooredoo’s list of markets it’s looking to enter, in line with their presence as a telecoms operator in the country. Local players are also partnering to stimulate the local market, as evidenced by a consortium including Swicorp Infra Capital (SIC), Income Egypt and Record Digital Asset Venture recently announced that it will build and operate a green data centre in the country, following a memorandum of understanding signed with the government. In Libya, local provider, Libyan Spider, are constructing new data centres in the region, most recently in September of 2024 in Tripoli, in an attempt to compete with the incumbent LPTIC technology group.

Foreign investment from beyond the MENA region is also starting to reach the shores of North Africa: a US start-up called Iozera.ai announced last year their plans to build a 386MW AI data centre in Morocco, at a cost of up to $500 million. Having signed a MoU with the Moroccan government, the data centre would be based at Tetuan, near the strait of Gibraltar.

The Iozera.ai project is a possible a window into the future potential of this region – geographically close to Southern Europe, and with a growing developer community, digital transformation is inevitable, assuming hurdles around stability and business continuity can be avoided. Located as a gateway between Europe, the Middle East, and the vast potential of Sub-Saharan Africa, on top of their local markets, indicate there is a significant opportunity for regional development.

Key questions for operators, developers, suppliers and investors in North Africa include…

• What are the key enablers of a successful data centre market (eg power, connectivity, regulatory stability), and which North African market has the most potential to meet local and regional demand with these required enablers?
• How can investors in the North African region combine assets, capabilities and partnerships to deliver on the vision of a regional hub at the meeting point of Africa, Europe and the Middle East?
• What policies could/should governments pursue if they want to accelerate digital infrastructure growth while retaining sovereignty over critical national infrastructure?