APAC to become the largest data centre region globally over the next decade

Singapore ranked as the region’s top data centre market.

Asia Pacific’s data centre market continues to grow at a relentless pace and is set to become the world’s largest data centre region over the next decade. According to Cushman & Wakefield’s latest 2022 Data Centre Global Market Comparison report, Singapore tops the Asia Pacific ranking (2nd globally), moving up two spots globally from 2021, while Hong Kong comes in 2nd in Asia Pacific (6th globally), rejoining the top 10 after missing out last year. Rounding out the Asia Pacific top three is Sydney (8th globally). 

Singapore scored highly on key criteria such as market size, fiber connectivity and cloud availability, and coupled with its pro-business policies, this has propelled the market to top position for APAC and 2nd globally. Underpinned by a high concentration of global tech companies and strong connectivity, Singapore is the premier data centre hub in the region, serving both local and regional demand. 

“Singapore is one of the tightest data centre markets globally with vacancy rates below 2%. Crippled supply due to the ongoing moratorium coupled with strong demand has driven up data centre prices since 2020. Current pricing is around S$200-S$400 kWh/month for the few small availabilities,” said Brenda Ong, Executive Director, Logistics & Industrial at Cushman & Wakefield. “While the moratorium is expected to be lifted soon, the tight supply situation could persist, with limited new supply coming into the market. Singapore faces land as well as grid constraints and has limited renewable energy options. This would be a limiting factor on new data centre supply, given the global sustainability push.” 

On the other hand, pent-up demand from hyperscalers and co-location operators continues to accumulate amidst a tech-fueled economy. Data centre prices are expected to continue heading north (up to 10% per year) and data centre cap rates are expected to compress further due to strong investor demand and limited market supply.

Despite the current moratorium on new builds, Singapore remains a strong location for data centre deployment, propelling the market to the top of the regional rankings, while tying for second with Silicon Valley on the overall global rankings. The result is also a testament to its strong ecosystems, excellent connectivity, consistent demand, and all major cloud services available and expanding where possible. 

“Asia Pacific’s outlook is exceptionally positive, with many multinational enterprises requiring further refinement in the cloud (or across multiple cloud services) and many regional governments pursuing online service access. Both established and emerging markets will see continued large-scale requirements for capacity by all participants,” said Todd Olson, Managing Director, Japan & Korea, and Head of Asia Pacific Data Centre Practice Group at Cushman & Wakefield. “It is a great time to be investing in this sector and we look to continue leveraging our experience, expertise and access to relationships and supply to drive opportunities within both the asset and platform space.” 

Ranked outside the overall top 10 markets last year, Hong Kong makes a big jump in 2022 to second in the region and comes in just behind the global top five markets. The market offers a robust development pipeline, excellent networks and all major cloud services are available. Considerable further growth is expected in Sydney (regional 3rd), Seoul (regional 4th) and Tokyo (regional 5th), as there is still some land and power available in key nodes despite their costs. 

Secondary markets continue to develop rapidly, so much so that many will be skipping directly to primary market size in the next three to five years. This includes Jakarta, Osaka, Seoul, and several core markets across India, with new tertiary markets beginning to arrive on the scene. Hyperscalers are the driving force behind this, with both US- and China-based companies battling for market share regionally. As such, there is an overwhelming need for new hyperscale capacity across the board, with the largest occupants looking to grow throughout the entire region. 

“The horizon for the data centre industry across the Asia Pacific region is exceptionally bright, thanks to deep hyperscale demand and the billions of dollars in development in progress to support these key tenants,” said Kevin Imboden, Cushman & Wakefield’s Senior Research Manager, Data Centre Insights, Global Research. “The 1.3 gigawatts under construction in the APAC markets reviewed is a small fraction of what is in planning regionally, with much action and growth coming over the next decade.”

Globally, construction totals continue to grow, with 4.1 gigawatts (GW) currently underway in the markets covered, up from 2.9 GW in the previous study and 1.6 GW in the year before that. The largest clients continue to require larger builds, with 100 megawatt campuses becoming increasingly common.

Further growth is expected throughout at least the next five to 10 years, as the region requires entirely new builds due to a lack of existing infrastructure for retrofit. Globally, regions across Latin America and Africa are also expected to enjoy considerable growth in coming years, as new undersea cables are bringing faster access to many markets for the first time. Secondary markets across the world continue to grow, with many soon to reach current primary market size.