Hong Kong bags 54% of APAC data centre outlay so far in 2020

Hong Kong
Image courtesy of Dan Freeman

Investment into data centres in Asia Pacific (APAC) is on the rise with the total transaction volume between 2018 and 2020 totalling $5.70 billion, which was 7.2 times that between 2015 and 2017.

Despite the pandemic outbreak, investment activity in the sector remains relatively robust with the total transaction volume in APAC over the first eight months of 2020 reaching $1.43 billion, about 56% of the 2019 level.

Hong Kong accounted for 54% of total investment into the APAC data centre market in 2020 to date. Among the most notable transactions, China Mobile secured an industrial government site for HK$5.60 billion in July.

According to the latest research by Cushman & Wakefield, Hong Kong ranked the fourth most attractive data centre location in APAC, trailing Singapore, Sydney and Tokyo. Also, Hong Kong ranked highest in terms of low tax rate and low climate risks and ranked in the middle in the categories of fibre connectivity, market maturity, and electricity costs. However, it scored poorly on its high real estate costs.

“Existing data centre demand is supported by banking & finance, insurance, and telecom operators,” said Eric Chong, Cushman & Wakefield’s associate director of research in Hong Kong. “We expect future demand to be largely driven by leading global cloud service providers such as AWS, Microsoft Azure, Google Cloud, Tencent Cloud, and Alibaba Cloud.”

Chong added that the growing importance of Internet of Things (IoT) applications, the impending 5G network, and fast adoption rates of cloud computing as well as the post-COVID-19 “new” normal are the four major factors driving the surge in demand for cloud storage.

Power shortages, however, are a major constraint on data centre development. The existing 11kV power supply network cannot meet the power demand of hyperscale data centres, which require a minimum of 20MVA + 20MVA.

Going forward, Cushman & Wakefield recommends the Hong Kong government and power companies to swiftly investigate and coordinate on how to increase power supply capacity and shorten power delivery timelines to ensure the infrastructure is in place for future data centre growth.