Demand in secondary and tertiary data centre markets continues to grow as operators and developers increasingly face power and land constraints in mature markets, according to the latest "Global Data Centre Market Comparison" report by the property services company Cushman & Wakefield.
Southeast Asia performs strongly in this regard, with Bangkok ranking third within the Asia-Pacific emerging markets category. Batam (Malaysia) and Manila are eighth and ninth, respectively, the report shows.
Bangkok's regional ranking also lifts it into 10th place in the global emerging markets category.
Demand overflow is evident in emerging locations across Asia-Pacific including Osaka in Japan, Chennai and Hyderabad in India, and Johor and Batam in Malaysia. Each is benefiting from high competition for sites in nearby mature markets: Tokyo, Mumbai and Singapore.
Singapore and Hong Kong both slipped out of the global established Top 10 ranking for data centres as a result of their limited land supply.
"We continue to experience unprecedented demand for data centres across key Southeast Asian cities and do not expect this to stop until power availability becomes a challenge," said Vivek Dahiya, head of the Asia Pacific data centre advisory team at Cushman & Wakefield.
Population growth, mobile penetration, 5G, the transition to cloud computing, online gaming and now AI -- all these tailwinds will continue to drive the appetite for data handling within the industry.
This growing digitisation, along with continued infrastructure deployments into emerging Asia-Pacific markets, has led to growth in emerging data centre cities including Johor, Batam, Kuala Lumpur, Bangkok, Ho Chi Minh City and Manila.
"Singapore remains highly desirable for its location and infrastructure, although it faces both land and power constraints, and comparatively higher land and development costs than many of its neighbouring markets," said Mr Dahiya.
"At a country level, Singapore is on track to join mainland China, Japan, Australia and India as markets with over 1 Gigawatt in operational capacity in 2024."
Gareth Powell, country head of Thailand with Cushman & Wakefield, reports significant demand from multinational corporations looking to capitalise on Bangkok's connectivity, available energy and relatively low operational costs. "This is evidenced by increasing land prices in previously undeveloped areas," he said.
"The Thai government's digital policies, including tax incentives and subsidies for technology investments and efforts to streamline data centre construction processes, reflect a strong commitment to supporting the digital economy," he added. "Combined with Thailand's strategic Southeast Asia location and active trade agreements, Bangkok is becoming a key player in the regional data centre market."
Now in its fifth year, the 2024 Global Data Centre Market Comparison uses an updated methodology to better reflect the rapid changes in the factors shaping the data centre market. High-weight factors include power availability, land availability and market size; mid-weight factors include development pipeline, land price, power cost and cloud availability/operator presence.
Thirty Asia-Pacific markets were included in the report, including new entrants Auckland, Batam, Brisbane, Perth, Pune and Taipei.
The report shows Asia-Pacific is expected to see its existing operational capacity more than double from the current 10.6GW in the coming five to seven years, thanks to its development pipeline of 13.3GW. Capacity in both the Americas and Europe, the Middle East and Africa regions is also expected to more than double. Among the report's other findings:
- While higher interest rates have slowed transaction volumes for many commercial real estate sectors, there has been consistent momentum for institutional capital expansion in the data centre space. While there have been a few cases of projects being paused or cancelled, fears of a complete halt of expansion plans in the wake of worldwide economic stress have been largely unfounded.
- The amount of capital raised targeting the data centre sector dropped from $41 billion in 2022 (a record) to $7 billion, closer to historical averages.
- With many of the primary colocation providers now paired off with key institutional investors, there are few prospects for large-scale acquisition opportunities remaining in established markets. Investors seeking to enter the space may want to focus on partnering with or acquiring emerging operators, ones that are less mature in their expansion plans or focused on specific regions.
- Hyperscalers continue to drive the market, entering tertiary markets first and also building momentum for self-performing hyperscale assets.
- Secondary markets are anticipated to continue their growth in importance as certain primary markets have run into constrictions, with power usage and sustainability scrutinised more carefully.
- Data centre developers around the world continue to face increasing pushback from government and local communities when it comes to development. Challenges have arisen from grid power availability versus competing uses, resistance, real or perceived, that data centres may not be bringing the level of economic betterment in the form of employment and taxes that local communities desire.
- Operators for their part have made increasingly stronger commitments to renewable power usage, providing investments that work to benefit their surrounding communities.
To read the full report, visit https://tinyurl.com/bdetrv4t