Asia Pacific’ data centre is poised to enter a new cycle of growth, led by the region’ larger emerging markets - Photo by Telkomsigma

JAKARTA (TheInsiderStories) – Asia Pacific’ data centre is poised to enter a new cycle of growth, led by the region’ larger emerging markets, according to a new study by JLL. Asia Pacific is home to three of the world’ four most populous countries (mainland China, India, and Indonesia), providing attractive locations and fueling a new cycle of operators and investors’ opportunities.

Surging internet usage and smartphone adoption, coupled with social media, e-gaming, video streaming, and big data applications, are all fueling requirements for extra data centre capacity across the region. According to JLL, demand for data centers continues to grow exponentially in Asia Pacific, drive by cloud computing and the consumer mobile internet.

The market for hosting, storage, and computing cloud services is expected to be worth US$163 billion in 2021, which is an almost 30 percent increase over 2017, says the report. Additionally, cloud traffic in Asia Pacific is set to grow by more than 150 percent over the same period.

“The sheer scale of growing data consumption makes data centre infrastructure a compelling global and regional opportunity for both investors and operators. There are clear opportunities across the Asia Pacific data centre sector, in both emerging and mature markets, as demographics and regulatory frameworks evolve,” says Bob Tan, senior director at JLL.

According to him, investor and operator activities in mainland China, India, and Indonesia have grown significantly in recent months. They will further expand as demand for data centre services surges in these high-growth markets.

He believes that all three emerging markets are currently being underserved by existing supply and facing strong demand from local and international operators. Mainland China has more existing and upcoming supply than any other market in Asia Pacific, with significant investments and commitments announced over the past 18 months.

In June 2020, Blackstone announced an investment of $150 million in Chinese data centre provider, 21vianet. Then, GDS and GIC announced a partnership in 2019 to build and operate data centres in China, signaling the market’ longer-term potential. In India, the Adani Group has plans to invest around $10 billion in data parks and has inked a memorandum of understanding with the American-based Digital Realty in 2019.

Colt DCS also broke ground for a new hyperscale facility in Mumbai in 2020, one of India’ most extensive hyper-scale facilities. Equinix has announced its entry into India in 2020 through the acquisition of GPX India.

In Indonesia, the new INDIGO cable landing in Jakarta connecting Singapore to Sydney adds to the country’ attractiveness as a data centre market. In November 2020, Space DC open its first Indonesian data centre19. Separately, Keppel Group has partnered with the Salim group to develop its first data centre jointly. In contrast, the Princeton Digital Group has entered the market from its acquisition of majority stakes in PT XL Axiata Tbk (IDX: EXCL)’ data centre portfolio.

“While it is still a niche property sector in Indonesia, data centers have been receiving quite a lot of interest from foreign investors for the past two years. Indonesia’ potential, especially the growing middle-class and young population along with the increasing number of internet users, has become one of the main factors that attract investors and operators to enter Indonesia’ market,” said Yunus Karim, Head of Research, JLL Indonesia.

Despite the clear opportunities in the region’ emerging data centre markets, there is also a strong local component to the investment evaluation criteria, which needs to be considered. Data localization laws and other regulations and factors such as proximity of markets served and access to power supply require a nuanced view of the sector.

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