Investor Demand for Asia Pacific Data Centers Hit Record Highs in 2021

Investor Demand for Asia Pacific Data Centers Hit Record Highs in 2021

Commercial News » Singapore Edition | By Michael Gerrity | April 26, 2022 8:42 AM ET

According to the latest CBRE research, the rapid surge in data demand, fueled by continued growth in cloud computing and social media use, is driving increased investor interest in Asia Pacific data centres, with investment in the sector soaring to record levels in 2021.

Direct investment in the APAC data centre sector totaled $4.8 billion in 2021--more than double the previous high of $2.2 billion in 2020 and surpassing investment volumes for the past four years combined. Transaction volume and fundraising activity is expected to remain robust in 2022, with data centres ranking as the most popular alternative investment for the third consecutive year in CBRE's recent survey of real estate investor intentions.

Interest in the sector has been underpinned by demand from hyperscale cloud providers for bigger facilities and multiple-site deployments. There were several large portfolio deals in APAC in H2 2021, including DigitalBridge-backed Vantage Data Centers' purchase of PCCW's data centre portfolio in Kuala Lumpur and Hong Kong, and the acquisition of five data centres in Japan by Digital Edge and Stonepeak Infrastructure.

"There is a considerable amount of capital looking to gain exposure to data centres as investors' understanding of the sector matures. We have already seen strong growth in recent years and the pandemic-driven digitalization trend has really supercharged interest in the sector. While opportunities will be limited relative to the demand that we are seeing, investors are pursuing the operational route by setting up dedicated platforms to secure higher returns," said Tom Fillmore, Director of Asia Pacific Data Centre Capital Markets for CBRE.

Vacancy was stable at 14% for Asia Pacific's Tier 1 markets of Greater Tokyo, Singapore, Sydney and Hong Kong SAR, despite record supply of 305MW in H2 2021. Almost 2,100MW of supply is slated to be completed by 2024, with Sydney constituting 40% of the pipeline. The new additions place Sydney on track to become the region's largest colocation market by 2024 in terms of data centre capacity.

Key report findings:

  • The Greater Tokyo region is expected to see balanced demand-supply despite the completion of 200MW of new supply in H2 2021. Operators seeking geographical diversification outside Greater Tokyo are eyeing Osaka and other regional cities, causing rents to hold steady.
  • Data centre rents in Singapore are expected to rise despite the lifting of the moratorium on new data centre construction from Q2 2022 that would ease medium term availability. The 60MW per year cap on total capacity for new applications means that Singapore's supply pipeline will lag other Tier 1 markets in Asia Pacific.
  • Sydney is set to have the largest development pipeline among Asia Pacific Tier 1 markets with newly announced mega projects. Hyperscale and wholesale rents are expected to come under pressure as new capacity, completed in phases, adds to growing vacancy.
  • Hong Kong rents and vacancy are expected to hold firm as corporate end-users and hyperscale cloud providers remain on the sidelines while near-term supply remains limited.

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