Savills Research May, 2024: Asia Pacific Data Centres
Head to Savills Research to read about why Asia Pacific’s data centre sector is booming, and how Southeast Asian markets are poised to become the region’s date centre growth engine.
In its May, 2024 Asia Pacific Retail Data Centres research report, Savills examines the trends that are powering data centre growth and development in APAC, the challenges the sector faces, and why data centres in the region are among the strongest investment opportunities currently available.
Data Centres Primed to Underpin APAC Growth
Data centre operators are currently expanding in Asia Pacific, rapidly and across data types. Among the factors driving expansion are ongoing digitalisation and e-commerce, and broad adoption of cloud computing and 5G networks. The entrenchment of data intensive services is increasing demand, as are policy measures prioritising domestic data storage. Additionally, the emergence of AI has intensified hyperscale development by giants Amazon, Microsoft and Google. Currently, APAC has roughly half of the hyperscale data centres the US does. As of 2023, APAC’s colocation market size was over 10,000MW. That market is projected to reach 19,000MW by 2028, a growth rate of 13.3% CAGR.
Investment and Development Momentum Spikes
Relative underrepresentation and robust fundamentals is fuelling investment interest in the sector. As an investment, data centres offer stronger returns at a time of higher for longer interest rates. The potential for continued growth is also attractive. In Q1/2024, investment into the sector exceeded US$1.7 billion. That figure represents a surge of 325% y-o-y and 80% of total investment volumes for 2023. APAC data centres have emerged as a viable alternative asset in an environment of macroeconomic uncertainty.
Land Resources, Energy Supply and Sustainability Pose Challenges
Despite robust investment interest and bright prospects, the sector does face challenges. Energy consumption is a consideration that must be factored into development. Net-zero emissions targets mean operations must be balanced against environmental demands. Sustainability issues regarding energy efficiency and a pivot to renewables is also a factor. These are also crucial in AI processing, which consumes up to five times the power non-AI facilities do.
Another consideration is land resources. Data centres demand locations in close proximity to reliable power sources and digital infrastructure. Mature markets such as Tokyo, Singapore, Hong Kong and Seoul are facing land shortages. The demand has led to spikes in land prices, increasing upfront costs. Tokyo leads the world for data centre building costs, at US$13.7 per watt in 2023.
Indonesia, Malaysia and Vietnam Emerge as Data Centre Hotspots
Because of expansion restraints in mature markets investors are pivoting to Southeast Asian locations. China is currently the regional leader, home to 450 data centres as of Q1/2024. Fast-emerging markets Indonesia, Malaysia and Vietnam are home to approximately 150 centres combined. This represents enormous room for growth. SEA’s colocation sector is forecast to grow at 16.5% CAGR in the next five to seven years. SEA will buoy the region and help make it a digital powerhouse in the next decade.
Fast-growing Malaysia has been underpinned by demand from Singapore. Its excellent connectivity, policy support and incentives have already attracted major operators. High profile occupiers in Malaysia include NTT Group, Microsoft and Equinix. Indonesia has ambitions to capture 40% of the ASEAN digital economy by 2025. Hyperscale centres are planned for Bekasi, Karawang, Bogor and Batam, reshaping the sector in Indonesia. In Vietnam, digital transformation is in full swing, and the country’s data centres are dominated by local operators. However, enquiries from international operators for locations are surging. The proposed expansion of the 2023 Telecom Law has the potential to spur investment. The law comes into effect on July 1, 2024.
For complete details, read the May 2024 Asia Pacific Data Centres report at Savills Research: http://sav.li/9vp
