Data centres prove to be a profitable investment in developing countries

Hong Kong and Singapore have long been Asia’s kings of data centre development, but now developing countries are taking data sovereignty into their own hands

At a time when skyrocketing real estate prices and shrinking land availability squeeze returns in traditional markets, developers across Asia are turning to niche property types for growth. Data centres are proving an attractive investment. According to U.S. think tank Urban Land Institute and PwC, more than half of the developers in the Asia-Pacific region plan to become active in data centre development in 2019.

While Hong Kong and Singapore have emerged as regional leaders in the space, the market in Southeast Asia is growing rapidly as local businesses move more of their operations online and governments seek to establish data sovereignty. Bangkok, Jakarta, Manila, and Hanoi are expected to see major data centre developments in the coming years, while emergent markets in Phnom Penh and Vientiane are picking up steam.

In Cambodia, there is a national push to develop IT infrastructure to spur foreign investment, empower an emerging young workforce amid labour shortages, and help build its homegrown start-up market. This year, work completed on the IT Media Hub in Phnom Penh—a joint venture between Urban Data Center Co. and Kingsland Global. The development was awarded Best Data Centre Development and Best Data Centre Architectural Design at the 2019 PropertyGuru Cambodia Property Awards.

While Hong Kong and Singapore have emerged as regional leaders in the space, the market in Southeast Asia is growing rapidly as local businesses move more of their operations online and governments seek to establish data sovereignty

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“We are seeing the IT sector grow here quite quickly,” says Nito Lim, co-founder and managing director of NI Development. “The government here recently announced a USD70 million deal with a Malaysian company to build another one, so the government is very keen to develop IT infrastructure,” relates Lim.

Unlike Singapore or Hong Kong, which aim to court big data players, development in countries like Cambodia focus on local demand. According to Thida Ann, director of CBRE Cambodia, development in these markets is driven by owner-occupiers looking for redundant capacity or to cater to anticipated demand. While these emerging markets will grow, she says, it might be a while before you see major investment from international companies.

“There is a clear need for further development in this space, particularly in close proximity to service users,” she says. “As the market matures and businesses continue to grow, we may see demand from international tenants. However, the current situation is expected to persist for the foreseeable future.”

This article is the second in a four-part series. It originally appeared in Issue No. 155 of PropertyGuru Property Report Magazine. Read the first, third, fourth parts here