CapitaLand Funding (CLI) has launched its analysis paper on funding methods for Asia Pacific’s (APAC) knowledge centre (DC) trade, highlighting the demand drivers behind the fast development of DCs within the area and the funding issues for traders.
This analysis paper is a part of CLI’s ‘Views’ analysis collection and features a case research on navigating India’s DC sector.
APAC as a robust development market
DC transactions in APAC rose about 2.4 occasions to roughly US$22 billion from 2019 to 2023, regardless of market stagnating throughout the COVID-19 pandemic as reported by CLI.
In response to CLI, the rise of synthetic intelligence (AI) is fuelling a “extra explosive” development in DC than cloud computing, which has been the first driver for DC demand.
“Digitalisation is a worldwide mega development driving the expansion of information centres,” CLI managing director of DC non-public funds Michelle Lee stated.
CLI noticed that whereas the revolution within the scale at which knowledge is getting used and managed is a worldwide phenomenon, it’s not unfolding as quickly as in APAC markets.
Nevertheless, CLI discovered that APAC markets are nonetheless underserved on inhabitants per megawatts (MW) foundation as in comparison with areas corresponding to Europe, Center East and Africa (EMEA) and North America.
The analysis paper additionally revealed that the area’s “monumental inhabitants” and “swelling web person base” makes the area a “extremely enticing” vacation spot for DC funding.
As acknowledged within the analysis paper, APAC’s web person base has grown seven occasions since 2005, in comparison with the expansion of 1.9 occasions within the Americas and 1.8 occasions in Europe over the identical interval
Attributed to the rising web adoption and excessive energy penetration charges in APAC, CLI believes that APAC markets will proceed to guide in knowledge centre funding.
CLI additionally predicts that APAC will develop into “the world’s largest colocation DC market”, with expectations that the APAC colocation market will double to US$52 billion by 2026.
“With the DC sector’s sturdy secular tailwinds, 97 per cent of institutional traders plan to extend their capital allocation into the sector, significantly in Asia Pacific,” Lee remarked.
“As DCs are extra resilient, allocation to this asset class will be an integral a part of traders’ portfolio diversification technique.”
At present, primarily based on CLI findings, the important thing developed APAC DC markets are Tokyo, Osaka, Seoul, Singapore and Sydney as they’ve “achieved scale” and are “essential DC hubs” within the area.
CLI additionally sees promise in Beijing and Shanghai resulting from China’s giant inhabitants, rising digital providers sectors, sturdy authorities assist and sturdy long-term financial prospects.
India’s rising DC calls for
Within the analysis paper, CLI CEO of India Sanjeev Dasgupta asserted India as a “hotspot” for DC funding.
“India’s DC trade has seen rising curiosity from institutional traders and has a protracted runway for additional development,” he added. “India has the world’s second highest variety of cellular subscribers and one of many quickest rising knowledge consumption per person charges.”
Dasgupta defined that the federal government’s digitalisation drive, knowledge localisation regulation and the expansion of cloud and AI will generate extra demand for DC capability.
By way of key DC markets in India, CLI identified that Mumbai, Bengaluru, Chennai, Hyderabad, Delhi NCR, Pune and Kolkata are the focal factors for brand spanking new DC growth as they’re in proximity to enterprise centres.
Particularly, Mumbai was named because the “preeminent hub” because it hosts greater than 50 per cent of India’s DC capability.
DC funding alternatives
By way of finest alternatives for traders, CLI asserted that it lies in constructing new knowledge centres in APAC because of the “lack of stabilised DCs accessible on the market” in APAC.
With regards to funding issues, CLI underscored energy availability as a “essential determinant” for DC places.
CLI additionally highlighted DC sustainability as an funding consideration. It is because DC customers and operators are in search of to scale back their carbon footprints by being extra energy-efficient and tapping renewable power sources.
As well as, CLI pressured that traders ought to be aware of the geopolitical, regulatory and technological dangers related to DC investments.
As such, CLI emphasised the significance of traders in collaborating with DC companions who’ve a robust community, native experience and specialist area information.
