According to the latest report from CBRE, a leading global real estate consultancy, the data center investment market in Asia Pacific reached a record high with direct transactions totaling 59 billion baht ($1.8 billion) in the first half of 2021. Interest in the data center market in Thailand is increasing, alongside the challenges faced by data center providers in finding land parcels that can meet specific demands, such as high utility usage and fiber optic connectivity.

The country with the highest share of data center investment is mainland China, which closed several significant deals in the first six months of the year, including GLP's acquisition of a 50% stake in the Songjiang Internet Data Center in Shanghai and GDS's purchase of a data center in Beijing from CITIC Group.

In 2020, data center investment reached a five-year high due to significant digital growth driven by the COVID-19 pandemic. In 2021, investments in data centers during the first six months accounted for 80% of the total market value of property investments from the previous year. This year, data center investment is expected to exceed last year's levels, with additional significant deals anticipated in the second half of the year.

The demand for data centers in Asia Pacific is fueled by concerns over data security and government regulations, as various governments have tightened data storage requirements. China's data security law, which took effect on September 1, has prompted companies to establish centers to store all data generated by their operations. Major hyperscale cloud providers have also expanded their footprint in the first half of 2021, with several large companies signaling plans to build new data centers and service areas in mainland China and Hong Kong.

Investment opportunities remain promising in leading Asia Pacific markets, maintaining a healthy vacancy rate. The net data center usage in Tokyo, Sydney, Singapore, and Hong Kong slowed to 70 megawatts in the first half of 2021, down from 123 megawatts in the second half of 2020. The overall vacancy rate in these markets rose to 14.6% as of June 2021, slightly up from 13.9% in December 2020.

“What we are seeing now is a balanced situation in terms of demand and data center volume, as data center providers maintain a healthy vacancy rate of around 20% to accommodate expansion requests from tenants. Providers will begin planning new projects when existing data centers are about 60-70% occupied. The remaining 10% or less of unsold space is often reserved by existing tenants rather than new users,” said Ms. Lim Chin Yee, Senior Director of Data Center Solutions at CBRE Asia Pacific.

The overall power capacity for server colocation in leading markets across Asia Pacific stood at 1.876 gigawatts as of June 2021, a 5.4% increase from December 2020, as new projects are expected to come online in the second half of the year. Tokyo is the city with the most expansion plans among the four leading markets in Asia Pacific over the next three years.

While investors remain enthusiastic, the current volume of stable data center investments is limited. Direct acquisitions by investors are expected to slow down. “Significant acquisition opportunities are likely to come from major data center owners in the region, such as telecommunications companies looking to monetize their assets through sales and leasebacks. Although developing new projects is another possible entry into the market, it is mostly done by providers rather than investors,” said Mr. Tom Fillmore, Director of Data Center Capital Markets at CBRE Asia Pacific.

“As investors show strong interest in this business, we also see them considering indirect investment opportunities, such as partnering with providers, financing projects, or investing in equity instruments, such as Digital Edge becoming a major shareholder in Indosat, which occurred after the relaxation of foreign investment regulations,” Mr. Tom added.

Mr. Adam Bell, Head of Industrial and Logistics at CBRE Thailand, commented, “In Thailand, CBRE sees an increasing interest in the data center market, where currently only a few providers dominate the market. Whether through direct investment or joint ventures with regional data center providers, the land requirements for building data centers tend to be more specialized than for general manufacturing facilities, covering much broader requirements regarding utility usage and fiber optic connectivity.

Download the report at: Asia Pacific Data Center Trends H1 2021