Data congestion: can real estate keep pace with AI growth?

Almost everyone in real estate is by now familiar with the word grid congestion. The Netherlands produces enough electricity, but in more and more places the electricity grid cannot transport that energy to the right place at the right time. Companies find a suitable building, but cannot get a heavy connection installed there. Availability and transport capacity turn out to be two different things.

That lesson is remarkably relevant to something discussed far less often: the digital infrastructure of our buildings. When it comes to data, we usually look at only one thing. Is fiber present? While the better question might be what digital capacity is actually available, from the national network all the way to the patch panel and ultimately the workplace.

In this blog we explain what we at IT-Label mean by data congestion, whether that is even the right term, and what it means for commercial real estate in an economy that is becoming increasingly dependent on cloud and AI.

What do we mean by data congestion?

First an honest caveat. Data congestion is not an officially recognized concept within telecom, government or academia. You will not find it as a well-defined term used by regulators or research institutions. We use it as an understandable umbrella term: situations in which demand for connectivity, capacity, availability or data processing becomes greater than a given link in the chain can practically accommodate.

The key insight is that such a bottleneck can arise at various levels. Consider the following links:

• The international and national network: data centers, internet exchanges and backbone connections.
• The regional and local network: fiber and telecom infrastructure toward neighborhoods and business parks.
• The building connection: the connection or connections through which a property is actually connected.
• The internal building infrastructure: backbone, cabling, switches, patch rooms and wifi.
• The workplace: the ultimate digital experience of the user.

This leads to a point that is often missed. A country can have excellent digital infrastructure while an individual building or a specific user still experiences a bottleneck. The chain is as strong as its weakest link, and that link surprisingly often sits inside the building itself.

The highway as a simple metaphor

Picture the digital journey as a highway. Data travels a route: data center, backbone, local network, building connection, internal infrastructure and only then the workplace. If one of those components has insufficient capacity, quality or redundancy, that is where the bottleneck forms.

Compare it to a six-lane highway that ends in a narrow access road to a business park. The highway can be perfect. But that does little good for the end user if the final stretch cannot handle the traffic. Fiber in the street is that highway. It says nothing yet about the exit ramp.

We measure the square meters, the year of construction and the energy label of every building. But what a building can digitally handle appears nowhere.

Is the presence of fiber even the right question?

Virtually every leasing brochure now states it: fiber available. On its own, that statement says little about the digital quality of a building. The questions that actually matter usually remain unanswered.

Questions behind the connection

• Which providers are available and what capacity can they deliver?
• Is scaling up possible, and are there multiple connections via physically separate routes?
• What happens in the event of cable damage or an outage?
• Can the internal backbone process the available capacity, and how old is the cabling?
• Does the wifi support hundreds of devices at once, and are the ICT rooms suitable to grow along with demand?

A fiber connection is one component of digital infrastructure. It is not automatically a guarantee of digital future readiness. We elaborate on that distinction further in our article on fiber in buildings.

What is AI changing?

The rise of AI, cloud and SaaS is visibly changing organizations' data usage. Video communication, IoT sensors, smart building applications and real-time data processing are all increasing. At the same time, nuance is warranted. Not every AI application means an office suddenly needs enormous amounts of extra bandwidth. Much of the heavy computation actually takes place in external data centers.

But that only makes reliable connectivity more important. As organizations become more dependent on external cloud services, it is not just about how much data can flow through. It is about the combination of availability, reliability, speed, latency, redundancy and scalability. We explore what AI and real estate mean together further in our piece on AI and real estate.

From grid congestion to data congestion

Let's draw the comparison carefully. With grid congestion, a company can find a business building that is perfect in terms of location, floor space and rent, but that has insufficient electrical capacity available. The future question is obvious: could digital capacity eventually become a heavier location criterion as well?

A strongly data-driven company finds an excellent office of 2,000 square meters. It then turns out the digital infrastructure is insufficiently redundant, the cabling is outdated and scaling up is costly. Physically, the company fits perfectly. Digitally, perhaps not. That dilemma connects directly to the question of who is responsible for the IT infrastructure in a leased building.

Digital growth capacity

In real estate, we routinely ask how many square meters a company needs today, and how many in five years. In a digitalizing economy, a second growth question belongs alongside it: how much digital capacity does this organization have now, and later? Digital growth capacity is not just about Gbit per second, but about the ability to grow along with more employees, more devices, more cloud usage and higher demands on availability and cybersecurity.

Capacity problem or transparency problem?

Perhaps the first challenge is not even that the Netherlands has too little digital capacity. Our network ranks among the better ones internationally. The problem lies elsewhere: for individual buildings, we simply do not know enough about what digital capacity is available. Alongside a possible technical capacity issue, this mainly creates an information problem.

A tenant can hardly take digital future readiness into account if that information is missing during the search. Provider coverage maps exist, but say little about what happens inside the facade. At the building level, digital capacity is nowhere structurally recorded, even though this is increasingly the first question of modern tenants.

What does this mean for value and lettability?

Caution is warranted here. We are not claiming that a more digitally advanced building is automatically worth more. Relevant questions do arise, however. Does an office with high-quality, scalable infrastructure become more attractive to technology and knowledge companies? Does outdated infrastructure lead to additional investments for a new tenant?

And furthermore: does digital infrastructure belong in technical due diligence and in the long-term maintenance plan? Should asset managers plan digital CAPEX alongside energy CAPEX? These are not rhetorical questions, but considerations that are likely to weigh more heavily in the coming years.

The role of IT-Label

Let's be clear about what the IT-label does and does not do. It cannot determine how much capacity a national telecom network has. It does not solve national congestion. What it does do is make clear what is present at a specific building: external connectivity, available providers, building connections, redundancy, internal backbone, cabling, ICT rooms, wifi, smart building readiness and the division of responsibilities between tenant and landlord.

We translate that technical information into an understandable delivery level, from IT1+ PREMIUM to IT5 SHELL. The user does not need to grasp every technical detail. They need answers to three questions: what is present, what can I do with it, and can I grow with it? You can read how that translation works in how the IT-label works.

Importantly: this is not a warning against technology. AI, cloud and digitalization offer enormous opportunities for the Netherlands and Europe. The message is not that AI will soon cause congestion. The message is that an increasingly digital economy needs a physical infrastructure that can grow along with it. That applies to data centers, to telecom networks and ultimately to buildings as well.

Your next step

From grid congestion, we have learned that availability is not the same as capacity. That lesson can be applied to our digital infrastructure as well. In an economy that is becoming increasingly dependent on cloud, data and AI, what will soon matter is not only how many square meters you can rent, but also how much digital growth capacity a building has.

Want to know what your building can digitally handle, or what to look out for as a tenant? As an owner, explore the options for office buildings, or as a tenant, read what to look out for. That way, you make visible the blind spot we now need to map out.