Investments in Apac data centres going strong after last year’s record highs: CBRE
/ EdgeProp Singapore |
ST Telemedia opened its first data centre in Bangkok last September (Photo: ST Telemedia Global Data Centres)
SINGAPORE (EDGEPROP) - Direct investments in the Asia Pacific (Apac) data centre sector continue to show strong momentum after surging to record levels last year, according to research compiled in CBRE’s recent Asia Pacific Data Centre Trends 2H2021 report.
In 2021, the sector saw a total of US$4.8 billion ($6.5 billion) in investments, more than double the previous high of US$2.2 billion recorded in 2020 and exceeding investment volumes for the past four years combined.
Source: CBRE
The marked increase in investments was supported by several large portfolio deals. US-based Vantage Data Centers, which received US$1.5 billion in fresh equity from investors led by investment firm DigitalBridge Group, announced its expansion into Apac last September through two major purchases. It acquired data centre provider Agile Data Centers, which is developing greenfield hyperscale campuses totalling 168 megawatts (MW) in Tokyo, Osaka and Melbourne; as well as Hong Kong telco PCCW’s data centre business, encompassing another 100MW in assets located in Hong Kong and Kuala Lumpur.
Other notable transactions include the acquisition of five data centres in Japan by Singapore-based Digital Edge and US investment firm Stonepeak Infrasructure, from Itochu Techno-Solutions, for US$230 million. Fundraising also saw brisk activity last year in Apac. At the start of 2021, Keppel Corp closed its second data centre-focused fund with US$1.1 billion in equity, while US-headquartered global data centre provider Equinix announced the expansion of its joint venture with GIC by a further US$525 million to fund two new developments in Seoul.
Alternative investments
Transactions are expected to remain robust this year, with “a considerable amount of capital looking to gain exposure to data centres”, notes Tom Fillmore, director of Apac data centre capital markets for CBRE. “We have already seen strong growth in recent years and the pandemic-driven digitalisation trend has really supercharged interest in the sector,” he adds.
A recent survey conducted by CBRE on real estate investor intentions shows that data centres ranked highest among alternative investment choices for a third consecutive year, further highlighting the sector’s sustained demand. As competition for data-centre assets intensifies, CBRE anticipates further cap rate compression in 2022.
CBRE’s report also highlights that since 2021, select investors have started setting up their own dedicated platforms. Stack Infrastructure, a data-centre company backed by investment firm IPI Partners, announced its expansion into Apac last October via the development of a 36MW pipeline in Tokyo. More recently, Singapore’s SC Capital Partners launched its data-centre platform, SC Zeus Data Centres, in February with plans for a US$500 million hyperscale facility in Seoul.
This trend is expected to continue in the coming months. “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,” says Fillmore.
Tier 1 markets
Among Tier 1 markets in Apac (comprising Greater Tokyo, Singapore, Sydney and Hong Kong), vacancy stood relatively unchanged at 14% as of end-2021, despite record supply of 305MW added in the second half of the year. Net absorption in the four markets stood at around 280MW. CBRE attributes the stable vacancy rate to sustained demand for hyperscale cloud providers, as companies seek bigger facilities and multiple-site deployments.
Source: CBRE
Between 2022 to 2024, an estimated 2,100MW in new supply is expected to be produced across Tier 1 markets, of which over 40% will be concentrated in Sydney. “These new additions will ensure Sydney replaces Tokyo as the region’s biggest co-location market by 2024,” CBRE’s report says. The influx of supply is expected to compress Sydney’s data-centre prices while boosting vacancy rates in 2022.
In Singapore, the lifting of a moratorium on new data-centre construction in 2Q2022 is anticipated to improve availability in the medium term. Nonetheless, a 60MW-per-year cap on total capacity for new applications will mean Singapore’s supply pipeline will lag behind other Tier 1 markets, supporting data-centre rents in the city-state.
Elsewhere, the Greater Tokyo region is expected to see generally balanced demand and supply in the coming months. However, more operators are seeking geographical diversification to Osaka and other regional cities, which may underpin an increase in vacancy rates in 2022 from their current levels of 15% as of end-2021. Meanwhile, in Hong Kong, demand remains sluggish on the back of socio-political concerns. However, limited near-term supply is expected to keep data-centre rents and vacancy rates relatively stable.
Beyond the Tier 1 markets, CBRE believes more activity may also be seen in emerging Southeast Asian markets, as large populations of Internet users and solid economic growth drive interest in the region.
Companies are already pushing to gain a foothold in Southeast Asia, including Singapore-based companies such as Singtel, which established an Asean-focused data centre platform through a joint venture with Thailand’s Gulf Energy last October. Earlier this year, the joint venture added Thai telco AIS to the partnership, with plans to develop data centres in Thailand. US companies are also starting to expand into Southeast Asia, including Microsoft, which announced plans to establish its first data centre in Malaysia last April.
Other Southeast Asian markets to watch include Indonesia, where Tencent opened its first data centre in April with plans to open a second, as well as Thailand, where ST Telemedia opened its first data centre in Bangkok last September, notes CBRE.
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