Development of data centre assets across the Asia Pacific is expected to ramp up later this year, according to CBRE research.
Across the four tier 1 markets of Tokyo, Sydney, Singapore and Hong Kong, Tokyo has the largest pipeline of development over the next three years with about 350 megawatts due to come online in 2022, and a total of 526MW planned to 2024.
Data transaction volumes hit a five-year high in 2020, and data centre investment reached 80 per cent ($2.4 billion) of last year’s high in the first half of 2021, and should eclipse the total at the end of the year.
AirTrunk submitted a development application for SYD3 in Sydney, adding to its current 370 MW capacity in Australia.
But development of new data centres has slowed in the first half of 2021.
CBRE Asia Pacific senior director of data centre solutions Lim Chin Yee said the market had reached an equilibrium, which had slowed down development.
“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 per cent as a large buffer for expansion,” Yee said.
“Operators only plan new developments when their existing assets are 60 to 70 per cent occupied.”
Vacancy across tier 1 in Asia Pacific data centre markets increased from 13.9 per cent in December to 14.6 per cent in June 2021.
Yee said this was due to higher vacancy in Sydney, but operators in Asia Pacific were comfortable with a vacancy rate of about 20 per cent to maintain a buffer for expansion.
CBRE research indicated that most service expansions were focused on emerging countries in southeast Asia including Indonesia, due to its fast-growing digital economy and low barriers to entry.
New co-location data centre supply in second half 2021-2022
|Hong Kong||Digital Ready||24MW||2021|
|Tokyo||MC Digital Ready||38MW||2022|
|Sydney||DCI Data Centers||36MW||2022|
^Source: CBRE Asia Pacific data centre solutions
CBRE director of Asia Pacific data centre capital markets Tom Fillmore said the limited asset availability meant investment was largely from data centre owners as opposed to direct investments.
“The main acquisition opportunities for investors will likely come from … telecommunications companies seeking to monetise their assets via sale and leaseback deals,” Fillmore said.
“While greenfield development is another possible entry route, this remains dominated by data centre operators building their portfolios.
“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.”
Sydney now has a capacity of 488MW, with many completions in the first half of 2021, and there is 456MW in the pipeline for the next three years, which CBRE analysts said had stimulated a flight to quality.
This had an effect on older data centre vacancy rates and drove down rents.