Asia Pacific, March 29, 2021 – Data centre net absorption doubled in 2020, setting an all-time high – with Asia Pacific Tier 1 markets, including Tokyo, Sydney, Singapore and Hong Kong SAR, reaching 321.6 megawatts (MW).
This is one of the key highlights in CBRE’s new Asia Pacific Data Trends H2 2020 report, a half-yearly profile of data centre trends across the region.
This jump in net absorption was driven by a pandemic-led surge in demand for video conferencing, online schooling, entertainment, social networking and platforms to support remote working – spurring requirements for data storage computing and networking over the course of 2020.
Singapore and Sydney registered the strongest demand, closely followed by Tokyo. Most demand originated from hyperscale cloud providers, which contributed around two-thirds of annual absorption.
Among end-users, demand was led by gaming, over-the-top media services, online content and streaming providers, while other major demand drivers included global technology services companies, which continue to cater for growing corporate requirements for remote working and other virtual arrangements and financial sector firms, which are also displaying a strong appetite for colocation requirements and cloud storage.
The report reveals that digital transformation is generating demand for data centre capacity beyond traditional Tier 1 data centre markets.
In developed markets, data centre operators are seeking expansionary opportunities in other cities to reduce latency while enhancing local data exchange efficiency.
Demand in emerging markets such as mainland China, India and Indonesia also continues to gain momentum.
On the supply front, the four Asia Pacific Tier 1 data centre markets recorded unprecedented growth in total colocation capacity in 2020, which increased by 17% y-o-y to 1,781 MW by year’s end, with the bulk of completions located in Sydney and Singapore.
2021 will see a further increase in new completions, with several projects experiencing pandemic-induced construction delays during 2020 finally scheduled to come on stream.
Overall vacancy in Tier 1 markets continued to trend downwards over the year, falling to 13.9% as of the end of Q4 2020.
Other key trends identified in the report included an uptick in demand for edge data centres, which are smaller facilities located close to users and serving a small, limited area.
Potential Tier 1 edge data centre markets in Asia Pacific include suburban areas in Japan and Australia, with requirements also growing for remote management and/or remote hands services, which allow customers to have real-time visibility on critical functions such as environmental controls, physical security and network connectivity.
“The COVID-19 pandemic has accelerated digital transformation across areas such as e-learning, online shopping, content streaming and entertainment,” said Cameron Grier, Regional Director of CBRE Industrial & Logistics in Pacific.
Mr Grier added that; “Business continuity planning has also prompted the rapid uptake of cloud adoption to support remote working. Looking further ahead, the wider adoption of 5G, further digitalisation of healthcare and other government services will be the primary demand drivers of data centre growth.”
“Data centre groups have been very active in Sydney and Melbourne over the past year and are now even focusing their attentions on markets like South Australia and Western Australia,” he continued.
“Last year alone in Western Sydney, data centre groups acquired circa 55ha (550,000sqm) of land for hyperscale/cloud sites.”
“Data centre demand is pushing industrial land prices up across the country, for instance the market rate for benched and serviced land in Eastern Creek and Erskine Park is paying anywhere from $1,000 - $1200 per square metre, which is above market price.”
In the investment market, full-year transaction volume for data centre assets reached US$2.2 billion in 2020, the highest in five years. The year also saw a continuation of platform formation and M&A deals for data centres, with upwards of US$5.0 billion deployed by funding platforms and joint ventures across the region.
“Data centres continue to lure investors keen to avail of the opportunities resulting from massive demand for data storage and computation,” said Dr. Henry Chin, Global Head of Investor Thought Leadership and Head of Research, Asia Pacific, CBRE.
“The asset class also offers prospects for diversification and enhanced risk-adjusted returns. With operational risk and securing planning approvals remaining a challenge, CBRE advises investors to form partnerships with experienced data centre operators, especially second tier groups looking to expand their scale and capacity,” he continued.
Download the full report here.
Alex O’Neil, Senior Manager Communications
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