Jakarta, Indonesia, is arguably the most sought after location in the Asia-Pacific region for data centres. With its young demographic and projected population growth of 20 percent (52 million people) over the next 20 years, the demand requirements are significant.
Japan is seeing high growth at the moment with multiple large scale projects either starting construction or going through the design process. While power may be cheaper elsewhere in APAC, Japan remains top in terms of power grid stability.
This, paired with the extremely low-security risk, makes Japan an attractive and ultra-competitive market for data centre developers and clients.
Tokyo is the second most expensive place to build data centres globally in our index due to busy market conditions, labour and material shortages, combined with costly design requirements to build in zones with seismic risk, which all contribute to an elevated cost of $10/w.
Singapore remains an HQ for many tech companies. With its ease of doing business and low taxation, Singapore continues to be a strategic hub in the Asia-Pacific region.
Land availability and local authority restraints remain a roadblock for many, in either entering or expanding their footprint in Singapore.
Despite the Australian economy currently facing recession, the data centre industry is weathering the storm and is still considered to be a major growth area for capital investment, with service providers planning developments in the majority of major state capitals. In particular, there is a continuing process of redevelopment of existing infrastructure which is nearing "end of life".
Auckland is a new market added into our index for 2020. New Zealand is seeing a marked increase in data centre developments, with announcements in May that include Microsoft establishing their first data centre region in New Zealand, and Canberra Data Centres developing two world-class hyperscale data centres on development sites in Auckland.
The drivers for this growth include demand from existing customers for data centres in the region, and the opportunity to accelerate digital transformation opportunities across New Zealand.
The China data centre market was valued at US$13.01bn in 2019, and it is expected to reach a value of US$36.18bn by 2025. China’s stride into 5G mobile telecommunications technology and the booming eCommerce sector is elevating the value of data centres.
In particular, the eCommerce sector is adopting digital technology for efficient business processes. More than 70 percent of the population in China are currently using eCommerce services for performing commercial and non-commercial activities.
In Hong Kong, the data centre sector has been growing quickly. Its colocation data centre market is expected to reach US$1.7bn in 2023 with an average annual growth of 17 percent.
Korea is internationally recognised for advanced technologies and is one of the key data centre investment and construction locations in North-East Asia. Seoul and Gyeonggi remain advantageous locations due to their accessibility and infrastructure, but hold the disadvantage of poor land availability and higher prices.
The data centre sector has seen tremendous growth in India. A massive rise in internet usage and a shift to eCommerce platforms for purchases has fuelled the need for data storage.
With a population of 1.3 billion and a data sovereignty act coming in, conventional developers have diversified into data centres. The most lucrative markets currently in the region are Mumbai and Chennai predominantly due to power infrastructure and cable landing station in the region.
Construction market conditions and publicly known projects
We have seen a shift in the route to market for the big four tech companies, with the continuing trend of ‘build to suit’ leasing models, which has sparked many new data centre developer, owner and operator providers to enter the market.
This has seen a flurry of new projects being announced which is putting additional strain on an already struggling supply chain to meet with demand.
Indonesia has seen the most interest with this changing model, with Space DC recently entering this market, along with a number of other confidential developers following suit.
Japan has seen a huge surge of demand with Airtrunk, Google, Microsoft and Equinix all active in the market. The construction market has been monopolised by the big five contractors who have been dominating the data centre construction market.
The high construction cost in Japan is still a restraint for some clients, with the lack of competitiveness, localisation of design and seismic construction requirements, the cost per megawatt is the highest in APAC.
In Australia, the data centre construction market was hot as it entered 2020. Existing major Australian data centre providers, such as NEXTDC, Digital Realty, Equinix, Global Switch and AirTrunk have been continuing with their expansion plans, targeted at cloud businesses and enterprises.
Equinix is actively expanding its footprint in Western Australia, where NEXTDC has likewise just opened a new facility. CDC is currently constructing one of the largest data centre builds in Australia in Sydney.
In China, major Chinese telecom and IT players are also looking to scale up their data centres to ensure stability and reliability of data services, as the application of 5G, wearable devices, internet of things, and artificial intelligence spurs demand.
Alibaba Cloud has recently completed the construction of three super data centres in Hangzhou, Ulanqab and Nantong. The company has also announced that it plans to spend CNY 200bn (US$28.2bn) on its cloud infrastructure over the next three years.
In Hong Kong, Equinix, Global Switch, CITIC Telecom International Holdings, Digital Reality, China Unicom, Alibaba Cloud, and Tencent Cloud are fuelling the growth in the region.
Korea is seeing more international companies expanding into the market with Equinix opening its first data centre and Digital Realty currently under construction.
In India, there is approximately 500 MW in demand, of which 370 MW of development has currently been initiated. The focus for the next few years will remain on the colocation model of data centre development.
2021 outlook
The data centre construction industry will remain hot across Asia-Pacific going into 2021, with Indonesia and Japan as the most sought-after markets. India, Korea, China and Australia will also remain active with a wave of new projects anticipated to start in 2021.
New emerging data centre markets such as Vietnam, Thailand, Philippines and Malaysia are likely to gain more traction in 2021, with growing local and international demand.
New industrial parks being developed in these locations are providing access to power, water, utilities, ease of permitting and licenses, which have previously been a barrier to entry.
For further information contact:
Callum Agnew
Director
e: [email protected]
t: +60 (0) 3 22741100