Data centres in Asia-Pacific

Data centre construction markets across Asia-Pacific have been busy over the past 12 months with cost escalation being seen in many markets, in particular Hong Kong, which has been growing quickly despite the pandemic.

With a prosperous outlook for China’s new technology initiatives focused on artificial intelligence, big data and cloud computing, which are continually driving the digital transformation of modern businesses, there is a clear trend of data explosion ahead.

The surge in IT data centre infrastructure demand following COVID-19 pandemic, combines with the global commodity inflation trend are driving up the cost of data centre facilities build cost in China. The last 12 months has seen an approximately seven to 11 percent increase in the cost of data centre facilities build cost in both Beijing and Shanghai data centre markets driven primarily by increased cost of building materials especially price escalations in steel, copper and aluminium.

With increasing domestic demand and given Taiwan’s strong data protection laws and data storage infrastructure, Taiwan is poised to become one of Asia’s key data centre hubs, given Google and Microsoft’s expansion on the island nation.

The Australia market is currently very active with hyperscale expansion continuing and colocation providers still investing and expanding. The Indian data centre market has also seen a dynamic increase in demand in the region primarily due to the shift to remote working and increase in e-commerce. There is also indication that data centres are moving from enterprise to colocation models and will move to working in the cloud model in the future.

Indonesia is currently experiencing a technology revolution. While Singapore and Malaysia have previously grabbed the headlines, Indonesia is now the growth engine for the region with regard to data centres, e-commerce and telecommunications sectors. With Southeast Asia’s largest population, favourable demographics and a prioritisation around the digitisation of the economy, Indonesia’s development potential is exponential for interested investors. The market has seen strong demand from the major global cloud operators including Microsoft and AWS, and investment from data centre operators has peaked in 2021.

Construction market conditions and publicly known projects

Hong Kong has seen a range of new projects enter the market in 2021, with Equinix, CITIC, GDS, SUNeVision, Global Switch, amongst the major providers, as well as newcomers Mapletree and ECR Cayman, who are developing their first data centres in Hong Kong.

While Chinese operators currently remain the dominant players in this market, we see a trend that foreign operators, both carrier neutral colocation and hyperscale cloud providers, are gradually gaining market share often in joint venture arrangements. Some of the projects launched or announced by international operators include Apple with their expanding facilities in China, Hong Kong-based data centre firm – Big Data Exchange (BDx), announced the launch of the first phase of its data centre campus in Nanjing, China. Tesla has announced the establishment of its data centre in China to store all the data it generates from the sales of vehicles in China's mainland market.

Google has announced a third data centre in Yunlin county in Taiwan at a reported cost of NT$20 billion, with Microsoft announcing an Azure cloud region to be developed in the country which expected to launch in late 2021 or early 2022. This huge investment is causing a significant tension on the local labour market which is struggling to meet the demand.

GDS continues to acquire and build data centre campuses in across China, bringing six data centres online (two in Shanghai, three in Langfang, and one in Beijing through acquisition), and starting construction on five more in Beijing, Shanghai, Shenzhen, Changshu and Tianjin. Microsoft is reportedly planning to add four new data centres in Hebei, Beijing, Nantong and Shanghai by early 2022. Amazon has recently announced its own expansion in China. The company announced phase two expansion of its Ningxia region – operated by Ningxia Western Cloud Data Technology – with an expected additional floorspace 1.3 times that of phase one.

Australia has had multiple projects announced in 2021, including the expansion of NEXTDC 150MW hyper-scale site in Melbourne as well as a 300MW Sydney site. Macquarie, DCI and Vantage have all announced new projects and Telstra / InfraCo is continuing its data centre infrastructure investment in Sydney.

In India, the key markets for data centres remain Mumbai and Chennai, with an increase in Hyderabad and Delhi (NCR). Recently announced projects include a Brookfield development in Mumbai, Yondr’s new “EverYondr” project which will deliver 30MW by 2023, and Airtel’s expansion plan for Nxtra data centre with 400MW by 2025. We are also working with Data Centre Holdings India, bringing Mumbai’s largest single-plot data centre development into fruition.

The construction market in Indonesia continues to be challenged by limitations in supply capability for major data centre developments. As the global cloud operators choose to self-build in Indonesia, regional and global data centre operators have a greater focus on colocation and edge facilities. The last 12 months has seen the announcement of significant investments in Indonesia by Microsoft, Princeton Digital Group, ST Telemedia Global Data Centres, Digital Edge, Gaw Capital, and Pure Data Centres. In addition, local operators such as DCI (in conjunction with Data Centre Indonesia Sukses Makmur) and Telkom continue to scale up operations in country.

2022 outlook

Hong Kong’s position as the regional hub for data centre will be further reinforced by two new undersea cables (ADC and SJC2) that are both due to go live by the end of 2022.

To date, the majority of the data centres and racks in China are installed around the four tier-one cities – Beijing, Shanghai, Guangzhou and Shenzhen. However, IDC resources in Tier-1 cities have consistently been in short supply for years as a mixed result of limited resources and continuously growing demand.

Due to the relatively high carbon emissions and power consumption of large-scale IDCs, most of tier-one cities are reinforcing more stringent policy measures on the opening and expansion of new data centre projects. In particular, both Beijing and Shanghai have prohibited new data centre projects in the cities. As a result, data centre operators are pushing their plans toward nearby satellite cities. Encouraged by the Chinese Government, data centre infrastructure investments are diversifying to western and northern region of China.

Sustainability is a key focus of all operators in the Australia region. AirTrunk has recently announced the first data centre sustainability linked loan in the APAC region with a global operating PUE KPI.

The data centre sector in India is witnessing action from policymakers, investors, operators, regulators, enterprises and cloud players while recognising the demand in this sector. Research claims that Indian data centre industry capacity is expected to double from 499 MW IT load to 1007 MW IT load by 2023.

In Indonesia, it’s anticipated that Batam will become established data centre hub with a minimum of two construction projects likely to launch in 2022. The Indonesian government will continue to push a strong digital agenda – part of the Indonesia Maju economic programme and Industry 4.0 initiatives and continue to support strong digital investment through its investment board.

Construction challenges in terms of supply chains will persevere into 2022. However, risks around procurement and labour will ease as COVID-19 becomes more predictable and manageable from a construction standpoint.

For further information contact:

Callum Agnew
Director, Southeast Asia
e: [email protected]