Making a mark in the evolving data centre landscape
09 Sep 2024
The influx of foreign direct investments for the data centre industry, coupled with the increasing adoption of cloud computing and artificial intelligence (AI), have led to a lucrative opportunity for industry players.
Property developer Mah Sing Group Bhd is venturing into the data centre market as a strategic move to diversify its income stream and capitalise on the growing demand for data centres in the region by establishing a data centre hub that plugs the gaps in the market.
“The data centre industry is set to grow significantly due to increased demand because of AI and cloud computing, heightened investment in security and IT resilience and advancements in technology such as cooling and power efficiency, with a stronger emphasis on green energy,” says Benjamin Ong, CEO of Mah Sing’s Property Subsidiaries.
This is why the property developer made the decision to develop a data centre hub. Southville City, a well-established 428-acre township with comprehensive amenities and that forms a strategic triangle with Cyberjaya and Bukit Jalil, was chosen as the location for this data centre hub.
Mah Sing’s decision to enter the market was not made on the spur of the moment, says Ong. The group aims to leverage its expertise in real estate development to create profitable ventures in the data centre industry.
“There is an influx of data centre operators and increased competition in the market, driven by major cloud players unveiling plans to establish dedicated cloud regions in Malaysia. With our experience in developing towns and buildings that address the needs of the market, venturing into the development of data centres should be a seamless transition,” he adds.
Southville City was chosen as the location for the data centre hub based on several factors, such as infrastructure readiness, says Ong. This includes immediate access to power, water and high-speed connectivity.
Spanning a total of 150 acres, Mah Sing DC Hub @ Southville City has the capacity to support up to 500mw, offering significant scalability. The DC Hub @ Southville City is less than 50km from Telekom Malaysia’s upcoming cable landing station, which will ensure one of the lowest latency routes, Ong explains. Mah Sing will offer a dark fibre network that will enhance connectivity and performance.
“This provides ample room for future expansion, which is a key consideration for data centre operators looking to establish long-term operations. The speed to market advantage is also particularly important given the shortage of power and water in other locations,” he continues.
Mah Sing envisions making Southville City a data centre hub by capitalising on these strategic advantages, says Ong. Furthermore, the data centre hub will significantly enhance the value of Southville City by positioning it as a strategic location for digital and tech-driven businesses.
Thus, this development will likely attract high-value enterprises to the area, he adds. This includes tech firms, service providers and supporting industries that seek proximity to cutting-edge data centres facilities.
This will then increase demand for residential, retail and commercial properties and drive up property values, which will contribute to the long-term appreciation of Southville City as a premier mixed-use development.
“This move transitions Mah Sing’s profile from a traditional developer of residential, commercial and industrial properties to a key player in high-tech infrastructure development,” says Ong.
Not just a flash in the pan
Ong anticipates continued demand for data centres in the country and is confident in Mah Sing’s ability to adapt to the changing market dynamics.This is why it is essential that the data centre hub strengthens the company’s brand as a key contributor to digital transformation in the region. All this would enhance its appeal to investors and customers who value innovation and long-term vision.
Ong says the data centre hub will enhance Mah Sing’s future earnings through multiple channels. These include one-off gains from land sales to joint-venture (JV) companies, recurring share of profits from JV partnerships with data centre operators and the development or construction profits from buildings with data centres.
Additionally, there is potential for attractive investment gains upon exit, given the high valuation of data centre assets, says Ong. These diversified income streams are expected to contribute to Mah Sing’s long-term financial growth.
“As more data centre operators are attracted to the hub, Mah Sing sees significant potential to grow its recurring income and expand its data centre portfolio. This strategic approach not only enhances immediate returns but also contributes to long-term value creation for the company,” he says.
Speed to market is crucial to capture first-mover advantage and attract high-value data centre operators, he stresses. To mitigate risks and maximise returns, Mah Sing will form JVs with multiple established partners and explore diverse investment structures to spread the risk.
Moreover, the company will avoid speculative builds by only proceeding with construction after securing offtakers, says Ong. This ensures that each phase of a development aligns with confirmed demand.
“Mah Sing will leverage its expertise in land management and its fast turnaround capabilities to streamline the approval process and accelerate infrastructure development,” he adds.
To strengthen its position in the data centre market, Mah Sing has formed a JV with Bridge Data Centres.
“The partnership with Bridge Data Centres ensures best-in-class facilities, while Malaysia’s favourable policies for data centre investment, including incentives, mature infrastructure and commitment to renewable energy, further enhances the hub’s attractiveness,” says Ong.
This is why Mah Sing is in active discussions with multiple global and regional data centre operators that are looking to enter the Malaysian market, he reveals. The company is focused on strategic partnerships with players aligned with its vision for a scalable and sustainable data centre hub.
“Beyond the initial phase, Mah Sing is in advanced negotiations with another major data centre player for an additional parcel with up to 90mw of capacity. Concurrently, the remaining parcels in Southville City are actively being marketed to attract more operators, ensuring a steady pipeline of development that will further enhance the hub’s capacity,” says Ong.
Southville City is only the start of Mah Sing’s journey in the data centre market. The innovative property developer is also exploring opportunities for its other land banks. For instance, it is in discussions with a data centre operator for a 42-acre industrial parcel in the 1,313-acre Meriden East township in Johor Bahru.
“The Mah Sing DC Hub @ Southville City will elevate Mah Sing’s brand image as a forward-thinking and technologically advanced company. By entering the high-growth data centre sector, Mah Sing is showcasing its ability to adapt to emerging trends and its commitment to innovation,” says Ong.
Source: The Edge Malaysia
