Hong Kong data centre supply to rise 75% to 9.2m sq ft by 2026

Government land auctions now serve as the primary source of land supply for data centres.

Telecommunications has become more essential than ever for individuals and businesses under the COVID-19 situation. With travel restrictions and city lockdowns in place, people have learned how to effectively communicate with each other overseas. TeleGeography, a telecommunications market research firm, reported that global internet traffic saw a stunning 51% surge on an annual basis in 2020. This wider application of telecommunications has also led to higher demand for data centres. 

According to Knight Frank, in recent years, data centres in Hong Kong have been seen as good investments with tremendous growth potential, thus attracting investors to enter the market targeting great investment returns. Hong Kong is an attractive location for data centres because of its advanced telecommunications infrastructure, reliable power supply at reasonable cost, limited climate risks, and strong demand from local companies for cloud services. 

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Most of the existing data centres in Hong Kong are located in Tseung Kwan O (18%), Tsuen Wan (16%), Chai Wan (12%), Kwai Chung (11%) and Shatin (8%), according to Cloudscene. The total GFA of data centres in Hong Kong was estimated to be 5.2 million sq ft as at the end of 2020. This is expected to increase by 75%, or around 3.9 million sq ft, to a total of 9.2 million sq ft by 2026.

Currently, the primary source of land supply for data centres is government land auctions. Other potential sources include waiver and lease modification applications, and sales of sites in the open market. Data centres, especially the higher-tier ones, have specific operational requirements regarding electricity generation, transmission and distribution networks, high headroom, and large site area for building support facilities. This makes it technically challenging to convert older industrial buildings into data centres, so greenfield sites are highly attractive to investors. 

Purchase sentiment for data centre sites remained robust during the COVID outbreak with major transactions being completed. For instance, in July 2020, China Mobile snapped up a site in Fo Tan for HK$5.6 billion to construct a data centre. And in February 2021, Mapletree acquired a site in Fanling for a 217,000-sq-ft data centre development for HK$813 million. 

COVID has highlighted the importance of data centres. With the market in Hong Kong maturing, buying appetite of any site available will only become stronger.