Data center investments will continue to grow in Asia Pacific, with investor interest rising in the emerging markets of China, India and Indonesia, according to JLL. With a growing demand for data storage, many companies are looking to rent a share of facilities, rather than own a center. This demand means that Asia Pacific revenue for shared or colocation data centers is expected to overtake the United States, rising to 40 percent of global share by 2020.

Driven by the region’s rapid urban population growth and adoption of e-commerce, Asia Pacific is experiencing a surge in data generated from various digital products and services. To cope with the amount of information, businesses are shifting toward storing their data on cloud services. Leading cloud providers such as Google, Amazon, Microsoft and Alibaba are competing to add cloud zones across the region, as Asia Pacific’s spend on public cloud services may hit $15 billion in 2018.

“As the cloud market matures, organizations need to establish their infrastructure capacity quickly in order to keep up,” said Bob Tan, director of alternatives, JLL Asia Pacific. “We’re seeing more investors looking to enter or increase their exposure to the data center sector as it offers diversification benefits and tends to have higher yields than traditional asset classes, such as office or retail.”

According to a new report by JLL, established investors and operators in Asia Pacific are setting their sights beyond the primary locations — Singapore, Hong Kong, Sydney and Tokyo.

Tan added, “Typically, investors have preferred these cities for their robust infrastructure, connectivity and relative ease of doing business. While these will remain as key markets, cities in China, India and Indonesia are emerging hotspots since they offer large population bases, high Internet penetration rates and social media activity. In recent years, data protection and cybersecurity legislation in these markets have forced users to switch to on-shore data centers, further stoking demand.”

Already the fastest growing data center market in the world, China’s need for colocation space continues to be anchored by the country’s rapid fintech growth, digital transformation and reliance on big data analytics, says the report. JLL predicts that tier-two Chinese cities will also draw interest due to the availability of land and power, lower operating costs, and improving network and support infrastructure.

Likewise, the report highlights that India’s massive population base, coupled with state-led initiatives, are likely to boost growth in the public cloud services market. The second-
largest country by mobile Internet users, India’s Internet economy is projected to double by 2020. Digital India, a government campaign aimed at transforming the country into a digitally empowered economy, is also expected to push greater demand toward quality data center builds.

Andrea Zander is web content editor at Institutional Real Estate, Inc.