APAC 2024 data centre investments to be fuelled by “insatiable demand”: analyst

Tokyo, Singapore, Seoul and Sydney are the key investment destinations in the region.

The reliance on data centres for business, commerce and communication grows daily and the world’s largest real estate investors are increasing their investment – total transaction volume of Asia Pacific data centre asset sales was at US$1.1 billion last year, with strong investor interest and a rebound projected in 2024.

CBRE’s annual Global Data Centre Investor Survey examines how the sector is benefitting from greater investment, despite power constraints, supply chain delays, extended delivery timelines and high interest rates. The survey represents input from investors, developers, investment managers and operators – 24% are directly involved with colocation facilities.

“Each region will face its own unique challenges and opportunities but everyone in this space will benefit from the ongoing institutionalisation of the data centre asset class and strong industry fundamentals,” said Tom Fillmore, Executive Director, Data Centres, Capital Markets Asia Pacific, CBRE. “Despite high interest rates and inflation, the market is expected to revive, especially in Japan and Korea where stabilised assets are likely to attract investors.”

Growth of AI has driven the demand for larger and more sophisticated data centres. While investors intend to materially increase investment this year, limited supply and construction delays have led to high rental growth rates. More new entrants are expected in the Asia Pacific region due to this trend.

“Insatiable demand from major occupiers for data centre consumption, especially in the Cloud and AI sectors, has driven the growth of this asset class in the region,” said Dedi Iskandar, Head of Data Centre Solutions, Asia Pacific, CBRE.

“Occupiers are now competing aggressively to increase their data centre footprint to accommodate the future needs of their business. APAC’s lag in infrastructure compared to Europe and the U.S., along with a large gap between capacity and demand, led to a significant rental increase which has made the region very appealing to data centre investors.”

Below are a few themes from the survey:

Increasing Investment: Nearly all (97%) survey respondents say they will increase their investment in data centres in 2024. Forty-four percent say they will allocate more than US$500 million for data centre investment, a significant increase from the 32% last year.
Shift in Investment Focus Due to Market Dynamics: Eighty percent of investors say they are interested in opportunistic new development in 2024. This includes a ground-up development, re-purposing of existing assets, or redevelopment.
Interest in Hyperscale Build to Suits: Thirty-one percent of respondents said hyperscale build-to-suits are the greatest investment opportunity over the next 12 to 24 months, the most common answer.
Tokyo, Singapore, Seoul and Sydney are driving investor demand in Asia Pacific.