The era of big data has only increased investor interest in the growing data center sector globally. The Asia Pacific’s data center market in particular is expected to reach $53.58 billion in 2028, expanding at a compound annual growth rate (CAGR) of 12 percent from 2023 to 2028, according to Dublin-based Research and Markets.
“This is expected to be supported by trends such as greater reliance on technology by businesses, enterprise adoption of cloud computing and digitalization,” says Christina Tan, CEO of fund management and CIO of Keppel Ltd.
Keppel sees opportunities in key emerging Asian nations:
India: The International Data Corp. estimates India’s public cloud market will grow at a CAGR of 23.4 percent between 2022 and 2027 to reach $17.8 billion. To serve such growing demand, JLL projects the need for the addition of 678 megawatts of data center capacity between 2023 and 2025, requiring total investment of $4.8 billion in both data center infrastructure and real estate.
“This represents significant opportunities for investors to ride on the continued demand from hyperscalers, especially in and around key locations such as Navi-Mumbai and Chennai, which also have substantial undersea cable connectivity to cater to large populations,” notes Tan.
China: According to Tan, China’s data center market is driven by the rapid development of the digital economy, surging internet usage and smartphone adoption, growth of social media, gaming and streaming. Mordor Intelligence reports the China internet data center market is expected to grow from $64.01 billion in 2023 to $293.15 billion by 2028, at a CAGR of 35.6 percent during the forecast period (2023 to 2028). The government also announced the Eastern Data and Western Computing initiative in February 2022, identifying Beijing, Shanghai and the Guangdong-Hong Kong-Macau Greater Bay Area as some of the key hubs. These are places where Keppel is either operating or developing data center assets.
Indonesia: “The nation’s demographics and digitalization trends also support sustained demand for data centers over the medium to long term,” notes Tan. In particular, greater Jakarta in Indonesia is quickly transforming into a sizeable data center hub, she adds. “Besides being well connected by several subsea cables, Jakarta is also one of the most densely populated cities in Southeast Asia.”
According to Cushman & Wakefield estimates, however, the uncompleted and planned pipeline of data centers in greater Jakarta was more than three times the operational stock of 171 megawatts as of the first half of 2023, suggesting the market will take some time to absorb the future supply.
Subsea connectivity is an increasing infrastructure need to support the growing data center market globally. Keppel, for example, with its partners Meta and Telin, is currently developing the Bifrost Cable System, the world’s first subsea cable system that directly connects Singapore to the west coast of North America via Indonesia through the Java Sea and Celebes Sea.
In short, Keppel expects “demand for data center assets and connectivity solutions to continue growing as Asia plays catch up with Western markets, underpinned by the proliferation of AI and strong demographic fundamentals in the region,” says Tan.
Jennifer Molloy is senior editor of Institutional Real Estate Asia Pacific.