These 3 emerging markets in APAC are attracting billions of data center investments

Investors and occupiers set their sights on Indonesia, India, and China.

Demand for data centers is shifting to Asia Pacific’s emerging markets, with investors and occupiers spreading further afield to latch onto the boom in the region’s internet usage.
China, India, and Indonesia have seen a number of sizable deals from large investors, and billions of dollars of commitments for new sites, in the last year.

“There has been a noticeable shift from industry players to ride the next wave of growth in non-traditional markets,” says Ralph Davidson, Head of Regional Industries, Corporate Solutions, Asia Pacific, JLL. “Demand for data-center real estate across Asia Pacific has never been stronger, and we’re not even approaching peak interest.”

Data centers have been on a hot streak in markets like Japan, Hong Kong, Singapore and Sydney, fuelled by a boom in 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, an almost 30% increase over 2017, according to Statista. Cloud traffic alone in Asia Pacific will grow by more than 150% over the same period, according to Cisco Systems.

The shift in data center demand to emerging markets comes as investors and operators look for new locations to support this rising usage.

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

Mainland China presents the most immediate opportunity, Tan says. In June 2020, Blackstone announced an investment of USD 150 million in Chinese data centre provider 21vianet.

Additionally, China-based data center company GDS and Singapore’s sovereign wealth fund announced a partnership in 2019 to build and operate data centers in China.A similar story is playing out in India, albeit at an earlier stage. The Adani Group, a diversified domestic conglomerate, has announced plans to invest around US$10 billion in data parks. It also signed a memorandum of understanding with the U.S.-based Digital Realty in 2019.

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

The market in Indonesia, still at a more embryonic stage, saw activity surge in the fourth quarter of 2020. Space DC opened its first Indonesian data center in November and Keppel Group partnering with the Salim group to develop its first data center jointly. The Princeton Digital Group has acquired majority stakes in XL Axiata’s data center portfolio.
The new INDIGO cable landing in Jakarta, and connecting Singapore to Sydney, is expected to further boost interest.

“While regional drivers are elevating established markets along with the entire sector, APAC’s emerging markets are of growing importance to both investors and occupiers,” says James Taylor, Head of Corporate Solutions Research, Asia Pacific, JLL. “Several markets remain underserved in terms of data center supply and, as demand grows, this represents a significant opportunity for both existing players and those looking to establish a foothold in this growing sector.”

“While regional drivers are elevating established markets along with the entire sector, APAC’s emerging markets are of growing importance to both investors and occupiers,” says James Taylor, Head of Corporate Solutions Research, Asia Pacific, JLL. “Several markets remain underserved in terms of data center supply and, as demand grows, this represents a significant opportunity for both existing players and those looking to establish a foothold in this growing sector.”