Asia Pacific

1 Australia, Sydney

Data centre market context

Cloud providers are now the fastest-growing segment of most Australian data centre providers. The government sector continues to increase in maturity in its understanding of cloud technologies, how to use cloud to its advantage, and how to optimise its existing infrastructure.

Australia has progressed to now being one of the “Big Four” for data centres in Asia Pacific, alongside Singapore, Hong Kong and Japan. Greater diversity, however, has led to the fact that it is now harder to serve the entire region from one location. The Asia Pacific region is currently undergoing very strong wholesale colocation growth, driven by large-scale global cloud providers including Amazon Web Services (AWS), Google, IBM and Microsoft, as they expand aggressively in major hubs.

Construction market conditions and publicly known projects

Data centre construction market conditions are considered as hot. Major global cloud service providers have significant growth expectations for the Asia Pacific region and these providers are investing their capital to reflect their rapid growth. In response to this growth, a number of existing major Australian data centre providers, such as Digital Realty, Equinix, Global Switch and Metronode, in addition to new regional providers such as AirTrunk, are ramping up local data centre capacity.

Singapore-headquartered AirTrunk has committed a large chunk of cash to upgrade and expand its data centres in both Sydney and Melbourne.

Macquarie Telecom Group has also announced a phased expansion of its Macquarie Park Intelligence campus in Sydney to a 43MW facility.

The market is continuing to bring new players in. Planning and urban design firm Urbis recently put in an application to build a data centre in the Brisbane area that would initially provide data halls totalling 10MW of capacity.

2019 outlook

The vast majority of data centre developments in the region are centralised in the capital cities, however a more decentralised trend is expected to develop over time. Sydney is currently the primary data centre location for content and cloud providers in Australia, and for content delivery networks. However, Melbourne is progressively gaining importance as the second major content hub for Australia as new infrastructure cabling projects bring to market the necessary connectivity routes. There is further development in Brisbane and Perth.

2 China, Bejing and Shanghai

Data centre market context

The data centre market in China is set to grow by 13 percent over the course of the next four years. At the forefront of this growth are cloud services led by market leaders Alibaba, China Telecom and Tencent. The majority of existing data centres are located in Shanghai and then Beijing, and the need for hyperscale facilities is increasing.

The country wants to attract foreign services, which means the biggest shift in the market seems to be a drive for greater construction quality and a higher investment in redundancy. Developers are seeking to build “world-class” data centres with capacity that exceeds today’s demands.

Construction market conditions and publicly known projects

2018 data centre construction market conditions are considered warm, but heating up, with new international players now in the market. Indeed, planned new facilities from Apple, new campuses from Hong Kong's Chayora, and recent partnering approaches delivering carrier and cloud neutral colocation data centres, are helping to pave the way.

Planned new projects by GDS, and an announced investment from Chayora for a 280MW campus serving greater Shanghai, will help to sustain digital growth in parallel to growing market developments, such as satellite cities along the Yangtze River which are experiencing rapid expansion in residential and commercial developments.

USA operator CyrusOne has taken a minority stake in GDS.

A further boon for the Chinese market will be Google apparently planning to re-enter China with its search and advertising business, which may lead to the Google Cloud Platform also becoming available.  

Beijing has only a third of the number of cloud-connected data centres compared to Shanghai. Planned allocation of land for residential purposes is likely to stimulate commercial growth, which in turn will likely lead to data centre growth in the region, which currently comprises 11 operators with Anchnet and Sinnet being the primary two.

Tencent has announced plans to invest the equivalent of almost US$440m in expanding its recently opened data centre in Chongqing, south-west China, in response to demand for its services and to enable it to compete better with Chinese rival Alibaba.

2019 outlook

Large-scale investment is expected across the country. Successful projects require a balanced approach, with a firm grasp of local regulations, laws and zoning policies. The adoption of more recognised international standards would however benefit the market. Paying particular attention to quality, scalability and reliability is also becoming a major requirement for success in a market and is attracting international growth.

3 China, Hong Kong

Data centre market context

Hong Kong is an autonomous/free-market economy in south-east China. It is highly dependent on international trade and finance, with a major financial centre within the vibrant, densely populated urban centre.

As a major fibre gateway for intercontinental traffic between Asia and the USA, Hong Kong is recognised as one of the “Big Four” data centre locations in Asia Pacific, with over 100 active owners/operators.

The trend towards hyperscale facilities is threatened by the low availability of land in Hong Kong. Methods to overcome this include the conversion of facilities from existing industrial buildings. And also Hong Kong's Land Department advertising the availability of greenfield sites, including information on the suitability of these for data centre usage (i.e. conditions of sale and planning restrictions).

Construction market conditions and publicly known projects

The data centre sector has been growing fast in Hong Kong, with tendering conditions currently considered warm.

Telin Hong Kong has, this year, brought online its largest data centre in the city (also known as the Pearl of the Orient), adding just over 4,000 square metres of data centre space owned by Telekomunikasi Indonesia.

Global Switch Hong Kong launched stage one of its data centre located in the Tseung Kwan O Industrial Estate. The development is close to submarine cable landing stations and the Hong Kong Stock Exchange hosting facility. In response to market demand, the construction of stage two of this site is already underway and due to be operational in 2019. It will provide 71,000 square metres of gross space.

2019 outlook

We anticipate continued growth for the market, but with risks of a skilled labour shortage and the complications of adhering to local planning and regulation requirements.

4 India, Chennai and Mumbai

Data centre market context

India has the sixth largest global economy measured by GDP, and is arguably the number one growth market. The IMF World Economic Outlook predicts that India’s economy will grow at 7.3 percent in 2018.

President Modi’s government’s “Digital India” initiative is putting public sector services online. This, along with data sovereignty laws, is forcing data to be retained within India’s borders, and is helping to stimulate cloud services revenue growth.

This was supported by the budget announcements for 2018-19, clearly indicating heavy investment in infrastructure with a focus on renewable energies, telecommunications infrastructure and smart cities.

Construction market conditions and publicly known projects

Data centre construction market conditions emerged from a cold 2017, into what is now a warm market that is heating up.

Leading international cloud service providers – from both the East and the West – are known to be investing in India, with Bangalore, Chennai, Hyderabad and Mumbai each seen as key emerging markets.

From the East – Alibaba Cloud is set to open its second data centre in Mumbai following the launch of its first there earlier this January. NTT Communications’ Netmagic has, this year, launched two new hyperscale data centres in Bangalore (DC3) and Mumbai (DC6).

And Singapore’s Ascendas-Singbridge is seeking to invest in new hyperscale cloud facilities in Chennai, Hyderabad and Mumbai to cater for cloud providers.

From the West – AWS, Google Cloud and Microsoft Azure each have active regions India, though it is not public knowledge as to what is hosted or self-built and operated.

Locally, ITI, an Indian technology services company, has announced a development plan to update its main data centre in Mumbai as well as building a new facility in Uttar Pradesh. In addition, Reliance Jio Infocomm, the Indian mobile network operator, plans to build a US$143m data centre at a new 100-acre IT hub being built in Kolkata, West Bengal.

2019 outlook

International investment is expected to continue, although further upgrades are needed to the country’s infrastructure to secure the investment outside of the major cities. While the cost of construction is still relatively low, skilled IT professionals are seeing their wages rise as the competition for their services widens across both domestic and international technology investors, as the digital transformation of the country continues.  

5 Indonesia, Jakarta

Data centre market context

Indonesia is seen as a leading investment destination in Asia, and it is the fourth largest mobile device market in the world.

As such, the country has experienced exceptional data centre growth over the last few years, while experiencing significant change with the entrance of newer operators, with foreign partners, resulting in an increase in competition.

President Jokowi Widodo has said that Indonesia has the potential to be the largest digital economy in Southeast Asia by 2020, but further investment in developing the skilled talent to support this is required.

Construction market conditions and publicly known projects

The data centre construction market in Jakarta is considered warm, but heating up.

Amazon is gearing up to spend as much as US$1bn in Indonesia over a ten-year period. An undisclosed part of this investment is to be spent on cloud computing services. 

There will be competition from Alibaba Cloud though, which launched in Jakarta earlier this year.

Google recently confirmed  it will open a new cloud region in Indonesia next year. The Google Cloud Platform (GCP) is to be launched with three zones, its eighth region in the APAC region.

Singapore-headquartered Keppel Data Centres and Indonesian conglomerate Salim Group have signed a conditional agreement to jointly develop and operate a data centre in Bogor. The development of IndoKeppel Data Centre 1 (IKDC1) will consist of three phases, eventually totalling around 10,000 square metres. The shell and core and phase one fit-out is expected to be complete by the first half of 2020.

2019 outlook

The economy has grown steadily in Indonesia with public debt being relatively low and inflation moderate at around 4 percent. Governance is stable and political risk low. Stronger commodity prices should boost the value of exports and support growth.

The availability of skilled labour in the region though remains a key concern for the development of the data centre sector here.

6 Japan, Tokyo

Data centre market context

The Tokyo colocation market is expected to be worth US$2.3bn by 2023, enjoying a five-year CAGR of 6.5 percent for the period 2018-2023, according to data from Structure Research. The market will grow by 7.3 percent in 2018 from 2017’s market figure of US$1.6bn.

Much like its competing markets of Hong Kong and Singapore, Japan provides an important connection between mainland Asia and North America through submarine fibre cables.

The Tokyo metro data centre market has historically been controlled by domestic providers, though recent mergers and acquisitions and expansion activity from Colt DCS, Equinix and MC Digital Realty has “shifted this dynamic”, says Structure Research.

Construction market conditions and publicly known projects

Another similarity with the other hub locations in the Asia Pacific region is that the data centre construction market in Tokyo is hot.

As an example, planned cloud data centres were announced early in 2018 by Oracle and Equinix (TY11), and a new 50MW campus announced by Internet Initiative Japan (IIJ) should mean capacity delivery into 2019 and growth beyond is a very strong prospect.

It should be noted that the Japanese construction market is developed locally and is closed to many internationally known brands. A small number of large general contractors in the Tokyo region represent the bulk of data centre construction projects across Japan.

The General Conditions of Construction Contract (often referred to as JGCC) is the most used form of contract for private construction projects in Japan for both local and international clients. The binding language of the contract is Japanese and is subject to the laws of Japan. Contractors often resist many non-standard/international forms of contract, but international contracts such as FIDIC or AIA are being accepted. 

2019 outlook

The hot market condition is likely to continue into 2019 with more capacity expected to come online before Japan hosts the 2020 Olympics.

 

7 Singapore, Singapore

Data centre market context

Singapore is arguably the most mature of the "Big Four" in the Asia Pacific region for data centres. While Hong Kong is a direct competitor when it comes to organisations looking to set up headquarters in the region, Singapore has an edge with its stable geopolitical climate, supportive regulatory environment and relatively cheaper land costs.

Singapore's Multi-Tier Cloud Security Singapore Standard 584 also means that it has the world's first cloud security standard.

The ease of doing business in Singapore is attractive for the world’s largest organisations across a range of sectors, who require a strategic hub in the Asia Pacific region.

While the overall construction market has remained flat, investment in data centres has gone against the trend and has grown 10-12 percent year-on-year since 2015.

Construction market conditions and publicly known projects

The data centre construction industry is seen as experiencing hot market conditions in 2018.

Facebook has announced the market's single largest project. The company's first in APAC is expected to cost US$1bn, and is an 11-storey facility that will extend to 170,000 square metres over a four-year period.

Google announced a third facility with a US$350m investment.

Equinix has just completed the third and final phase of its SG3 data centre, and Amazon announced, earlier this year, that it was to expand its Singapore cloud region with the opening of a third availability zone.

At the beginning of 2018, Colt announced its intention to build a new data centre in the city state, and Chinese bank OCBC took the wraps off a US$182m facility.

China Mobile International (CMI) also broke ground on a new facility that will help it cope with regional demand. It will be linked to a variety of continental submarine cables it already controls in Singapore.

2019 outlook

With the significant hyperscale investments announced in 2018, the hot market conditions will remain hot for two years at a minimum.

8 South Korea, Seoul

Data centre market context

With tension with the North relaxed, the region is experiencing increasingly stable geopolitics, with expanding capacity due to several planned power plants over the coming years. Three of the main fibre providers have a presence in the city, with availability and quality of utilities generally of a high standard.

Seoul, the capital and most densely populated data centre location in Korea, has 15 established colocation data centres, hosting 30 cloud service providers.

Microsoft launched a cloud data centre in Seoul in 2017, following AWS. China's Tencent followed Microsoft soon after.

Like Japan, Korea is a pretty closed market for foreign contractors, which has an impact on data centre clients who want to manage installation and commissioning of specialist equipment via preferred vendors. Language and cultural barriers also add difficulty to doing business in Seoul.

Some of the more commercially mature contractors in Korea will have experience with FIDIC or other international forms of contract. However, the next tier contractors and sub-contractors will be less inclined to adopt non-standard Korean forms. The most used standard form of construction contract is the Standard General Conditions of Contract published by the Government’s Fair Trade Commission.

Construction market conditions and publicly known projects

Data centre growth in Seoul has slowed despite rising demand for cloud services. Current market tendering conditions for data centres are described as cold.

2019 outlook

There have been projects announced by Equinix and Microsoft, although not necessarily planned for Seoul, which are likely to stimulate market growth.

 

 


This content is part of the Data centre cost index 2018

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