Asia-Pacific data centre market continues to grow, says CBRE
16 May 2024
Investor demand for data centres in Asia-Pacific remains strong, with a wide range of buyers seeking stabilised assets. There has also been increased activity by hyperscalers and more corporates moving towards a co-location approach as well as a surge in artificial intelligence (AI)-related demand since late 2023. Overall, the Asia-Pacific data centre market continues to grow this year.
This was presented in CBRE Research’s Asia-Pacific Data Centre Trends 1Q2024 report, which explores key investment trends and the outlook for the data centre sector in the region and offers insights into six markets: Australia, Hong Kong, Japan, Singapore, India and South Korea.
Outlook for Malaysian market
CBRE | WTW group managing director Tan Ka Leong tells City & Country in an email interview: “The outlook for data centres in Malaysia is positive, as the country has seen significant growth in recent years and is well positioned to become a major player in the data centre industry in
Southeast Asia.”
Tan says there are more than 30 data centre companies and about 60 operational and upcoming facilities in the country. They are spread across two large clusters in Greater Kuala Lumpur and Johor as well as smaller developments in Sarawak and Bukit Kayu Hitam, Kedah. He adds that CBRE projects the market will grow at a compound annual growth rate of 9% by 2030.
“As at 2024, most of the data centre facilities were concentrated in the Greater Kuala Lumpur and Johor regions. Beyond these two large clusters, we noticed other alternative locations such as Sarawak and northern Malaysia.
“In addition, there is increasing interest in emerging areas such as Cyberjaya, which has become a hub for the business process outsourcing industry and is starting to attract interest from data centre companies looking to take advantage of the area’s reliable power supply and modern telecommunications network.
“Each of the facilities takes up between 10,000 and 150,000 sq m, with the growing trend to build larger spaces in the future. In terms of power capacity, the total operational capacity in Malaysia is more than 150mw, with an additional 1.3gw plus at various development phases.”
On what drives the demand for data centres in Malaysia, Tan says the shortage of available space and moratorium of IT power in Singapore and the continued strong consumption of data storage and compute resources in the region have pushed the new development of regional data centres in Southeast Asia to Malaysia and Indonesia as the next preferred destinations.
Tan adds that AI and content consumption are also primary drivers of data centre consumption in Malaysia. “The country’s internet economy has continued to rise. According to the IDC Asia-Pacific Cloud Survey 2021, 86% of organisations in Malaysia had higher-than-regional-average increases in cloud usage.
“The government is also promoting the digitalisation of public services to create a highly skilled and digitally enabled nation with a competitive digital economy, under the MyDIGITAL blueprint. Our country offers an attractive proposition as a key base for data centre companies and their [customers] targeting regional consumers in Southeast Asia.”
On top of its strategic location and use of AI, Tan says Malaysia also offers a stable political and economic environment; a well-developed telecommunications infrastructure; an abundant supply of educated and skilled workers; and competitive operating costs compared to other countries in the region.
“The combination of domestic traits and international factors makes Malaysia one of the most popular destinations for attracting data centre investment in Southeast Asia,” he says.
Notable trends in neighbouring markets
According to the report, small pockets of space could emerge in Singapore for enterprise data centres this year. There will be no available options for hyperscale data centres, however, because of the limited space and constraints on power supply that Singapore is facing. As a result, the demand for data centres has been spilling over into Batam in Indonesia and Johor Bahru in Malaysia instead, although these locations lack skilled data centre technicians.
In Hong Kong, investment interest remains firm but deal flow has been slow. Furthermore, many investors are looking at older buildings and assessing how these properties can be retrofitted to serve as data centres. For example, Goodman has confirmed plans to retrofit the Goodman Texaco Centre in Tsuen Wan into a 50mw data centre.
The report also says foreign companies that already have a presence in Hong Kong are now willing to expand and relocate with increased size. AirTrunk’s second data centre in Hong Kong, with a total capacity of 15mw, is scheduled to be completed by end-2024.
Meanwhile, Japan emerged as the top country with direct data centre investment volume last year. The report says the first half of last year saw demand focused on Osaka, with cloud providers aggressively seeking sites for new setups. This was followed in the second half of the year by a surge in AI-related demand for space in the Tokyo CBD.
The report predicts that Japan’s new data supply will peak in 2025 and 2026, with several developments providing about 1,300mw. The demand for data centres in Japan is driven primarily by investors and developers who are responding to growing AI demand by lodging bids for sites in the Tokyo CBD.
Hokkaido and Kyushu are also emerging as frontiers in the Japanese data centre market as the government looks to support decentralised data centre developments, the report says.
In Australia, many service sector and telecommunications companies operate large legacy data centres but are now shifting away from this model, owing to the high costs incurred in running such facilities, many of which are now out of date and inefficient compared to newer products.
The report also points out that Australian corporates are following the trend in the US and Europe, moving away from an in-house model towards a co-location and cloud approach, as there is huge demand for land from data centre operators in Sydney and Melbourne. For the overall Australian market, renewable power will continue to be a key focus for data centre operators.
Among data centre operators in other countries in Asia-Pacific, environmental, social and governance remains on their agenda but poses a challenge when it comes to execution. The report says markets such as Singapore and Hong Kong lack renewable energy.
With the lack of data centres for sale, investors are more focused on pricing and underwriting. Nevertheless, data centre owners are exploring ways to improve the sustainability of their facilities in the medium to long term, the report says.
Source: The Edge Malaysia
