Savills Prospects -February 2024: The AI Revolution and Data Centres, Booming Asian Mega-Cities, and Indian Retail REITs
Savills Prospects surveys the emerging Asia Pacific sector trends and demographic shifts that investors need to be aware in the coming years.
AI to be a Bright Spark for Asia Pacific Data Centres
Generative artificial intelligence (AI) broke through and gained significant traction in 2023. The technology, such as ChatGPT, inspired considerably anxiety and two labour actions in the US. Nonetheless AI is here to stay. Research indicates that the banking sector alone will sink US$85 billion into AI infrastructure by 2030. That figure dwarfs the US$6 billion overall, globally, estimated for 2024.
AI demands enormous computing power, and its subsequent energy requirements are expected to double by 2026. Energy efficiency mandates open data centres to the potential for creating a greener sector. As APAC’s data centre market grows, remote locations with cheaper land and greater renewable energy options gain appeal. Additionally, low latency — speed to the user — in AI’s training phase is not essential. Taken together, these factors present tremendous investment opportunities in a growing region.
Small REITs to Make Big Waves in India
Like many sectors in its resilient economy, India’s retail sector is thriving. Fractional ownership platforms in particular are in high demand. India’s new small and medium-sized real estate investment trusts — SM REITs — are set to boost retail investment further. The Security & Exchange Board of India (SEBI) has approved the new REITs at a minimum value of US$6 million. It is considerably more accessible than the original US$60 million demanded in 2014. As a result, the SM REITs will encourage non-institutional investment.
They will also bring fractional ownership schemes under the umbrella of SEBI regulation. Investors will be assured of a REIT’s eligibility, management and heightened transparency. The rapid growth of fractional ownership platforms demonstrates strong demand for retail real estate in India. Existing platforms that meet the eligibility criteria will give the market another boost.
Booming Cities Will Drive Asia Pacific Growth
Cities in all parts of the world have traditionally been major contributors to innovation and growth. Currently there are 19 ‘urban economic powerhouses’; cities boasting US$500 billion economies. At the top of the list is New York and its US$2.3 trillion GDP. It is joined in the upper ranks by Tokyo, Osaka, Nagoya and Seoul.
In the coming years, rapidly urbanising Asia Pacific will develop more of its own mega-cities. These in turn will become outsized contributors to the regional economy. Through 2050 India and SEA will be launching cities into the top ten. Delhi is poised to become the world’s largest city, home to 47 million people. Manila, Dhaka and Ho Chi Minh City will also experience massive growth. China will add Shanghai, Beijing and Shenzhen to the top ten. The growth of these cities presents tremendous opportunities for APAC’s real estate investors.
Author: Simon Smith
To read the complete Savills Prospects please visit:
