Strong secular tailwinds drive
investors' interest in the region's sector
SINGAPORE, July 5, 2024 /PRNewswire/ -- CapitaLand
Investment (CLI) has launched its latest research paper on
investment strategies for Asia
Pacific's (APAC) data centre (DC) industry as part of its
'Perspectives' research series. Leveraging insights from
CLI's expertise on the ground, the research paper highlights the
demand drivers behind the rapid growth of DCs in the region and
strategic investment considerations for investors. The paper also
includes a case study on navigating India's DC sector.
Ms Michelle Lee, CLI's Managing
Director, Private Funds (Data Centre), said: "Digitalisation is a
global mega trend driving the growth of data centres. With the DC
sector's strong secular tailwinds, 97% of institutional investors
plan to increase their capital allocation into the
sector1, particularly in Asia
Pacific. As DCs are more resilient, allocation to this
asset class can be an integral part of investors' portfolio
diversification strategy."
"CLI has accelerated our growth in the DC sector, adding 22 DCs
since 2021. Today, we have 27 DCs with about US$4.5 billion assets under management and more
than 800 megawatts (MW) in gross power across eight countries
globally2. CLI has vertically integrated DC
capabilities spanning across design, development, sales, and
operations. With DC domain capabilities, combined with our deep
market knowledge, deal-sourcing and investment network in
Asia, we are well-positioned to
partner with investors to tap into the wealth of opportunities in
the sector," added Ms Lee.
APAC as a strong growth market
While cloud computing has been the primary driver for DC demand,
the rise of artificial intelligence (AI) is now fuelling a more
explosive growth. The revolution in the scale at which data is
being used and managed is fundamentally a global phenomenon, but
nowhere is it unfolding as rapidly as in APAC markets. On
population per MW basis, APAC markets are underserved compared to
regions such as EMEA and North
America3.
APAC economies are not only growing faster, the region's
enormous population and swelling internet user base also cement its
status as a highly attractive destination for DC investment. Its
internet user base has grown seven-fold since 2005, compared to the
growth of 1.9 times in the Americas and 1.8 times in Europe over the same period4. Going
forward, APAC markets should continue to lead, as internet adoption
further increases given the lower penetration rates in the
region.
DC transactions in APAC rose about 2.4 times to approximately
US$22 billion from 2019 to 2023,
compared to the preceding five years, even as markets generally
stagnated during the COVID-19 pandemic5.
While hyperscalers continue to drive DC demand, APAC colocation
market is also expected to double in size to US$52 billion by 20266, becoming the
world's largest colocation DC market.
Key DC markets in APAC
Tokyo, Osaka, Seoul,
Singapore and Sydney are key developed DC markets in
APAC7. These markets have achieved scale and are
important DC hubs in the region.
Beijing and Shanghai also show promise due to China's large population, growing digital
services sectors, strong government support, and robust long-term
economic prospects.
Increasing demand for DCs in India
Highlighting India as a hotspot
for DC investment, Mr Sanjeev
Dasgupta, CLI's CEO for India, said: "India's DC industry has seen increasing
interest from institutional investors and has a long runway for
further growth. India has the
world's second highest number of mobile subscribers and one of the
fastest growing data consumption per user rates. The government's
digitalisation drive, data localisation regulation as well as the
growth of cloud and AI will generate more demand for DC capacity.
With CLI's 30 years of experience in India, we have the capabilities and a deep
understanding of the local market. We have a dedicated team of DC
experts in India and are currently
developing four DCs across the key markets of Mumbai, Bengaluru, Chennai and Hyderabad with a total gross power of 244
MW."
The seven major cities in India
– Mumbai, Bengaluru, Chennai, Hyderabad, Delhi NCR, Pune, and Kolkata – are the focal points for new DC
development, offering strategic locations with proximity to key
business centres. Mumbai stands
out as the preeminent hub, hosting more than half of the country's
DC capacity8 with the other major cities mentioned
developing strongly.
Opportunities and strategic
considerations
Different DC models offer a spectrum of options for investors,
catering to different preferences and risk appetites. However, the
lack of stabilised DCs available for sale in APAC means the most
promising opportunities for investors lie in developing new DCs – a
strategy that can both satisfy new demand and yield higher
returns.
Power availability has taken centre stage as a crucial
determinant for DC locations. There is also a growing emphasis on
sustainability. Increasingly, DC users and savvy operators are
seeking to reduce their carbon footprints by being more
energy-efficient and tapping renewable energy sources.
Investors should also be mindful of the geopolitical, regulatory
and technological risks associated with DC investments. It is
therefore crucial for investors to collaborate with DC partners who
have a strong network, local expertise, and specialist domain
knowledge.
To read the full research paper on DC investment strategies in
APAC,
visit: https://www.capitaland.com/global/en/about-capitaland/newsroom/Perspectives/2024/Apac_Data_Centre_Investment_Strategies_Age_of_Digitisation.html
Launched in 2022, Perspectives is CLI's series of thematic and
topical research reports aimed at providing proprietary insights on
real asset investment trends and strategies, private equity
developments, macroeconomy and markets. For more, visit:
https://www.capitaland.com/en/investment/news-and-events/perspectives.html
[1] 2024 Global
Data Centre Investor Sentiment Survey, CBRE.
|
[2] Includes data
centres in operation and under development.
|
[3] The World
Bank, United Nations, CBRE, CLI PERA Research, June
2024.
|
[4] ITU World
Communication, CLI PERA Research, June 2024.
|
[5] MSCI, Real
Capital Analytics, CLI PERA Research, June 2024.
|
[6] CBRE, CLI PERA
Research, June 2024.
|
[7] CBRE, Cushman
& Wakefield, DC Byte, CLI PERA Research, June 2024.
|
[8] Avendus, "DCs:
Powering Digital India", May 2023, DC Byte, CLI PERA Research, June
2024.
|
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