Australia
China
India
Indonesia
Japan
Malaysia
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
Rising internet use and the colocation* needs of tech companies are aiding the growth of the data center market in Asia, with increased investments from global as well as local data center operators. The region’s strong growth in cloud adoption, development of 5G networks and the e-commerce sector have led to a strong growth in internet traffic.
The ASEAN region is fast emerging as a key data center for global corporations. As per a Cushman & Wakefield report, Singapore is ranked the top market for colocation business, followed by Hong Kong, Sydney, Greater Seoul, Greater Tokyo, and Mumbai.
“Asia represents one of the last geographic frontiers in the data center space and is the area where we have the greatest opportunities. There is a huge mismatch between the lack of supply and the increasing demand in various parts of Asia,” as per Kok-Chye Ong, Managing Director and Head of Data Center (ex-China) at Gaw Capital Partners, a Hong Kong-based fund management firm.
A report by US-based Renub Research sees the Asia-Pacific data center market to reach $53.8 bn in 2028, growing at a CAGR of 12% in the next five years. Renub says currently the market is valued at $27.15 bn.
“A few major players dominate the Asia-Pacific market are; SUNeVision Holdings Ltd., PCCW Limited, Towngas Telecommunications Company Limited., China Mobile Limited, AT&T Inc., Digital Realty Trust Inc., Equinix Inc., Microsoft, NTT Communications Corporation, and Google,” says Renub Research.
Scaling Data Centers in Asia
Data centers are generally owned and operated by big companies or colocation companies that rent out IT infrastructure. In Asia, the largest data centers by size are mostly located in China, such as China Telecom Data Center, China Mobile data centers in Hohhot and Harbom, Range in Hebei province and China Unicom Data center. Some of these are still under construction and may take years until full completion.
However, tracking accurate data out of China is not always easy. Baxtel, a data center search service, ranks data center markets in Asia by number of sites as follows — Singapore, Tokyo, Hong Kong, Sydney, Mumbai and Kuala Lumpur.
As per the Cushman & Wakefield report, Singapore data centers had a 2% vacancy rate. A hub for most tech companies in the region, Singapore has reached a saturation point due to availability of space and power.
“There is not much scope left for new greenfield opportunities coming into the market, however, brownfield opportunities, if power can be secured, may be viable alternatives. The impact of the limited supply in Singapore and the recent moratorium have opened opportunities in neighbouring Johor and Batam markets in Malaysia and Indonesia,” says the US-based commercial real estate services provider.
Hong Kong has received interest from data center investors and operators due to its business and financial markets, as well as the status as a gateway to mainland China. Like Singapore, Hong Kong is facing shortage of land and power supply for data centers.
Sydney data centers facilities have a 17% vacancy rate and make up for over 50% of the total data center market in Australia. The recent completion of the Oman-Australia Cable (undersea cable) enhances Australia’s position as a hub between the US and Europe, Middle East, and Africa (EMEA).
South Korea’s data center market has benefitted from the entry of large US-based data center REITs, while demand is rising from cloud service providers.
“Data centers are emerging as an independent investment class in the Korean real estate market. We expect the data center market to continue to grow rapidly over the next five years as more and more companies are shifting toward cloud computing – in which data resources and IT services are hosted, managed and remotely delivered on an on-demand basis,” as per Judy Jang, Director at Colliers, a Canada-based investment management firm.
Tokyo, already a key market, has several major projects in the pipeline. Compared to other cities, Tokyo is relatively underserved in data center stock per capital, as per Cushman & Wakefield, potentially supporting robust demand from cloud providers going forward.
The last name on the list is Mumbai, which is the financial capital of India and also the largest data center market in the country. As of end-2022, there were six international operators in the city who have commenced construction of their data centers. The state government is working on drafting a data center policy considering the rising demand.
Upcoming data center markets in Asia
While we talk about the top choices currently, data center operators are tapping into other countries to grab a higher share of the growing market in Asia. Southeast Asia is emerging as a top destination, and consulting firm Kearney sees the region’s colocation market to grow 16.5% over the next five to seven years, compared to the growth of 11.6% in the rest of the world.
Cushman & Wakefield lists the following as the top emerging markets for data center business in Asia — Malaysia, Indonesia, India, Thailand, the Philippines and Vietnam.
“The region (Asia-Pacific) is also very fragmented: there are established data center markets, with many operators, like Singapore and Tokyo, and on the other hand, emerging markets like the Philippines, Vietnam, Thailand and Indonesia, where it is only recently that there has been interest coming into the sector. While there are still opportunities in established markets, we also believe that by being early investors in some of these emerging markets, we stand to reap significant rewards in these areas,” adds Gaw Capital’s Ong.
*Colocation offers companies to house their own servers in an independent data centre for rent
