Sep 13, 2021
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CBRE noted that last year’s data centre transaction volumes reached a five-year high as the pandemic accelerated digitisation.

The Asia Pacific region saw US$1.8 billion (S$2.4 billion) in direct data centre investments during the first half of 2021, with China accounting for the biggest proportion, revealed CBRE.

With data centre investment for H1 2021 hitting 80% of 2020’s full-year investment, data centre investment volume for this year is “expected to surpass last year’s benchmark as further major transactions are due to close in the second half of the year”.

CBRE noted that last year’s data centre transaction volumes reached a five-year high as the pandemic accelerated digitisation.

Data centre demand in the region is driven by data security as well as sovereignty concerns, as governments impose tighter requirements around data storage.

For instance, China’s Data Security Law – which kicked-off in 1 September – prompted corporates to build facilities for storing locally generated data.

“Hyperscale cloud providers also added to expansion during H1 2021, with several major corporations signalling new facilities and availability zones in Mainland China and Hong Kong SAR,” said CBRE.

It added that opportunities remain within Asia Pacific’s tier 1 markets, with total data centre net absorption in Sydney, Tokyo, Hong Kong and Singapore easing from 123 megawatts (MW) in H2 2020 to 70 MW in H1 2021.

These markets saw overall vacancy increase from 13.8% in December 2020 to 14.6% as of June 2021.

“What we’re seeing now is a comfortable supply-demand situation as data centre operators maintain a healthy vacancy rate of up to around 20% as a large buffer for expansion,” said Lim Chin Yee, Senior Director for Asia Pacific Data Centre Solutions at CBRE.

“Operators only plan new developments when their existing assets are 60-70% occupied. A facility with unsold capacity of 10% or less tends to be taken up by existing tenants rather than attracting new users.”

As of June 2021, total colocation capacity within Asia Pacific’s tier 1 markets stood at 1.876 gigawatts, up 5.4% from December last year as more new projects are expected to come online in H2 2021.

Among Asia Pacific’s 4-tier 1 data centre markets, Tokyo has the biggest pipeline in the next three years.

CBRE expects the limited asset availability within the region to temper direct data centre investments.

“The main acquisition opportunities for investors will likely come from some of the biggest data centre owners in the region: telecommunications companies seeking to monetise their assets via sale and leaseback deals. While greenfield development is another possible entry route, this remains dominated by data centre operators building their portfolios,” said Tom Fillmore, Director of Asia Pacific Data Centre Capital Markets at CBRE.

“Due to the robust investor interest in this sector, we are also seeing participation through indirect channels such as partnering with operators, providing project financing, or through equity investments, such as Digital Edge’s acquisition of a majority stake in Indosat following the relaxation of foreign ownership restrictions,” he added.

 

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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this story, email: victorkang@propertyguru.com.sg

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