- Significant growth and development in the sector expected.
- Data centres will be crucial for cloud services, and the adoption of AI.
- Despite more capacity coming online, Sydney vacancies fell over the past six months.
The importance of data centres is growing, as demand rises for cloud computing, artificial intelligence, and more.
Currently, 62% of operational data centre capacity in the Asia Pacific is concentrated across five cities: Beijing, Shanghai, Singapore, Sydney, and Tokyo, according to Cushman & Wakefield’s latest Asia Pacific Data Centre Update.
Emerging markets are also expected to more than double (>200%) their operational capacity over the next five to seven years. These markets include Indonesia, Malaysia, the Philippines, and Thailand.
Cushman & Wakefield’s director, data centres research and advisory for APAC and EMEA, Pritesh Swamy, said significant land banking in mature markets coupled with growing data consumption was leading operators to explore secondary markets.
“The potential capacity of land banks in some mature markets is greater than the combined total capacity of both under-construction and planned pipelines.
“While it could take more than 10 years to develop these land banks, operators have started to explore other locations.”
Pritesh Swamy, Cushman & Wakefield
He said cities with populations of over 1 million were often seen as strategic locations for smaller data centres.
“Smaller data centres can be used to cater for the local population or as a way for operators to show their enterprise clients that they have a presence in strategic markets and growth corridors.”
Australia at the forefront of DC development
More than 80% of operational capacity in APAC is concentrated in five markets: Australia, India, Japan, mainland China, and Singapore, said Cushman & Wakefield director and data centre advisory team lead, Australia, Alex Moffat.
“Across APAC, 9.7GW is currently operational, with an additional 3.3GW under construction and 8.5GW in planning stages. For Australia 1,145MW is currently operation, 265MW under construction and 1,443MW planned,” he said.
“Sydney continues to be the largest data centre market in Australia with 63% of the total operational capacity for the country. Sydney is one of the top 5 cities for data centres in APAC alongside Beijing, Mumbai, Shanghai and Tokyo which are categorised as powerhouse markets with each city forecast to exceed 2GW of capacity in the next 7 to 10 years. Cumulatively, these 5 powerhouse cities account for 54% of the operational capacity in all of APAC.”
The powerhouse markets are one of four categories in Cushman & Wakefield’s Markets Maturity Index, with the remaining three including emerging, developing, and established.
Market Maturity Index
“Operational capacity in Sydney has increased by 57MW over the past six months,” observed Moffat. The Property Tribune recently covered data centre developments across Sydney’s North Shore, Macquarie, as well as Melbourne.
Despite more data centres coming online, Moffat noted that Sydney’s vacancy rate has fallen from 17% to 12% over the past six months.
“The combination of strategic geographic location and subsea cable connectivity will ensure that Sydney retains its status as a powerhouse market in the region,” he added.
A CBRE survey earlier this year found the asset class was second on the list of investor ‘must haves’. Across 2022, CBRE found that some US$1.4 billion of data centres were transacted in the APAC region.
Indeed, the focus on artificial intelligence will be profound. The International Data Corporation (IDC) projects that global revenue for artificial intelligence (AI) will surpass US$300 billion by 2026.
Moffat noted that Sydney, Singapore and Tokyo are expected to exceed 1GW of operational capacity by 2026.
“Melbourne is also forecast to surpass the 500MW operational capacity in the next 5 years. Melbourne forms part of the established data centre market in APAC alongside Chennai, Hong Kong, Hyderabad, Jakarta, Johor, Seoul and Singapore,” he said.
“The next wave of data centre development will see builds exceed 100MW per site in both Sydney and Melbourne. Finding suitable land parcels in both Sydney and Melbourne for future data centre development continues to be challenging given the lack of suitably zoned land in both markets.
“We anticipate that many markets across APAC will witness accelerated growth owing to technological enhancements such as the adoption of AI, cloud services and deployment of 5G services. Ongoing government and enterprise digitisation initiatives will also drive requirements for additional capacity,” Moffat concluded.