New research on APAC data centre investment strategies

As part of its ‘Perspectives’ research series, CapitaLand Investment (CLI) has launched its latest research paper on investment strategies for Asia Pacific’s (APAC) data centre industry.

Leveraging insights from CLI’s expertise on the ground, the research paper highlights the demand drivers behind the rapid growth of data centres in the region and strategic investment considerations for investors. The paper also includes a case study on navigating India’s data centre sector.

Michelle Lee, CLI’s Managing Director, Private Funds (Data Centre), comments, “Digitalisation is a global mega trend driving the growth of data centres. With the data centre sector’s strong secular tailwinds, 97% of institutional investors plan to increase their capital allocation into the sector, particularly in Asia Pacific. As data centres are more resilient, allocation to this asset class can be an integral part of investors’ portfolio diversification strategy.

“CLI has accelerated our growth in the data centre sector, adding 22 data centres since 2021. Today, we have 27 data centres with about $4.5 billion (£3.5bn) assets under management and more than 800 megawatts (MW) in gross power across eight countries globally. CLI has vertically integrated data centre capabilities spanning across design, development, sales, and operations. With data centre domain capabilities, combined with our deep market knowledge, deal-sourcing and investment network in Asia, we are well-positioned to partner with investors to tap into the wealth of opportunities in the sector.”

APAC as a strong growth market

While cloud computing has been the primary driver for data centre demand, the rise of AI is now fuelling a more explosive growth. The revolution in the scale at which data is being used and managed is fundamentally a global phenomenon, but nowhere is it unfolding as rapidly as in APAC markets, CLI’s research suggests. Furthermore, on a population per MW basis, APAC markets are reportedly underserved compared to regions such as EMEA and North America.

APAC economies are not only growing faster, the region’s enormous population and swelling internet user base also cement its status as a highly attractive destination for data centre investment. Its internet user base has grown seven-fold since 2005, compared to the growth of 1.9 times in the Americas and 1.8 times in Europe over the same period. Going forward, APAC markets should continue to lead, as internet adoption further increases given the lower penetration rates in the region.

Data centre transactions in APAC rose about 2.4 times to approximately $22 billion (£17.2bn) from 2019 to 2023, compared to the preceding five years, even as markets generally stagnated during the COVID-19 pandemic.

While hyperscalers continue to drive data centre demand, APAC colocation market is also expected to double in size to $52 billion (£40.7bn) by 2026, becoming the world’s largest colocation data centre market.

Key data centre markets in APAC

Tokyo, Osaka, Seoul, Singapore and Sydney are key developed data centre markets in the APAC region, CLI tells us. These markets have achieved scale and are important data centre hubs in the region.

Beijing and Shanghai also show promise due to China’s large population, growing digital services sectors, strong government support, and robust long-term economic prospects.

Increasing demand for data centre in India

Highlighting India as a hotspot for data centre investment, Sanjeev Dasgupta, CLI’s CEO for India, explains, “India’s data centre industry has seen increasing interest from institutional investors and has a long runway for further growth. India has the world’s second highest number of mobile subscribers and one of the fastest growing data consumption per user rates. The government’s digitalisation drive, data localisation regulation as well as the growth of cloud and AI will generate more demand for data centre capacity.

“With CLI’s 30 years of experience in India, we have the capabilities and a deep understanding of the local market. We have a dedicated team of data centre experts in India and are currently developing four data centre across the key markets of Mumbai, Bengaluru, Chennai and Hyderabad with a total gross power of 244 MW.”

The seven major cities in India – Mumbai, Bengaluru, Chennai, Hyderabad, Delhi NCR, Pune, and Kolkata – are the focal points for new data centre development, offering strategic locations with proximity to key business centres. Mumbai stands out as the preeminent hub, hosting more than half of the country’s data centre capacity with the other major cities mentioned developing strongly.

Opportunities and strategic considerations

Different data centre models offer a spectrum of options for investors, catering to different preferences and risk appetites. However, the lack of stabilised data centres available for sale in APAC means the most promising opportunities for investors lie in developing new data centres – a strategy that can both satisfy new demand and yield higher returns.

Power availability has taken centre stage as a crucial determinant for data centre locations. There is also a growing emphasis on sustainability. Increasingly, data centre users and savvy operators are seeking to reduce their carbon footprints by being more energy-efficient and tapping renewable energy sources.

Investors should also be mindful of the geopolitical, regulatory and technological risks associated with data centre investments. It is therefore crucial for investors to collaborate with data centre partners who have a strong network, local expertise, and specialist domain knowledge.

To read the full research paper on data centre investment strategies in APAC, click here.

Launched in 2022, Perspectives is CLI’s series of thematic and topical research reports aimed at providing proprietary insights on real asset investment trends and strategies, private equity developments, macroeconomy and markets.

The post New research on APAC data centre investment strategies appeared first on Data Centre & Network News.

As part of its ‘Perspectives’ research series, CapitaLand Investment (CLI) has launched its latest research paper on investment strategies for Asia Pacific’s (APAC) data centre industry.

Leveraging insights from CLI’s expertise on the ground, the research paper highlights the demand drivers behind the rapid growth of data centres in the region and strategic investment considerations for investors. The paper also includes a case study on navigating India’s data centre sector.

Michelle Lee, CLI’s Managing Director, Private Funds (Data Centre), comments, “Digitalisation is a global mega trend driving the growth of data centres. With the data centre sector’s strong secular tailwinds, 97% of institutional investors plan to increase their capital allocation into the sector, particularly in Asia Pacific. As data centres are more resilient, allocation to this asset class can be an integral part of investors’ portfolio diversification strategy.

“CLI has accelerated our growth in the data centre sector, adding 22 data centres since 2021. Today, we have 27 data centres with about $4.5 billion (£3.5bn) assets under management and more than 800 megawatts (MW) in gross power across eight countries globally. CLI has vertically integrated data centre capabilities spanning across design, development, sales, and operations. With data centre domain capabilities, combined with our deep market knowledge, deal-sourcing and investment network in Asia, we are well-positioned to partner with investors to tap into the wealth of opportunities in the sector.”

APAC as a strong growth market

While cloud computing has been the primary driver for data centre demand, the rise of AI is now fuelling a more explosive growth. The revolution in the scale at which data is being used and managed is fundamentally a global phenomenon, but nowhere is it unfolding as rapidly as in APAC markets, CLI’s research suggests. Furthermore, on a population per MW basis, APAC markets are reportedly underserved compared to regions such as EMEA and North America.

APAC economies are not only growing faster, the region’s enormous population and swelling internet user base also cement its status as a highly attractive destination for data centre investment. Its internet user base has grown seven-fold since 2005, compared to the growth of 1.9 times in the Americas and 1.8 times in Europe over the same period. Going forward, APAC markets should continue to lead, as internet adoption further increases given the lower penetration rates in the region.

Data centre transactions in APAC rose about 2.4 times to approximately $22 billion (£17.2bn) from 2019 to 2023, compared to the preceding five years, even as markets generally stagnated during the COVID-19 pandemic.

While hyperscalers continue to drive data centre demand, APAC colocation market is also expected to double in size to $52 billion (£40.7bn) by 2026, becoming the world’s largest colocation data centre market.

Key data centre markets in APAC

Tokyo, Osaka, Seoul, Singapore and Sydney are key developed data centre markets in the APAC region, CLI tells us. These markets have achieved scale and are important data centre hubs in the region.

Beijing and Shanghai also show promise due to China’s large population, growing digital services sectors, strong government support, and robust long-term economic prospects.

Increasing demand for data centre in India

Highlighting India as a hotspot for data centre investment, Sanjeev Dasgupta, CLI’s CEO for India, explains, “India’s data centre industry has seen increasing interest from institutional investors and has a long runway for further growth. India has the world’s second highest number of mobile subscribers and one of the fastest growing data consumption per user rates. The government’s digitalisation drive, data localisation regulation as well as the growth of cloud and AI will generate more demand for data centre capacity.

“With CLI’s 30 years of experience in India, we have the capabilities and a deep understanding of the local market. We have a dedicated team of data centre experts in India and are currently developing four data centre across the key markets of Mumbai, Bengaluru, Chennai and Hyderabad with a total gross power of 244 MW.”

The seven major cities in India – Mumbai, Bengaluru, Chennai, Hyderabad, Delhi NCR, Pune, and Kolkata – are the focal points for new data centre development, offering strategic locations with proximity to key business centres. Mumbai stands out as the preeminent hub, hosting more than half of the country’s data centre capacity with the other major cities mentioned developing strongly.

Opportunities and strategic considerations

Different data centre models offer a spectrum of options for investors, catering to different preferences and risk appetites. However, the lack of stabilised data centres available for sale in APAC means the most promising opportunities for investors lie in developing new data centres – a strategy that can both satisfy new demand and yield higher returns.

Power availability has taken centre stage as a crucial determinant for data centre locations. There is also a growing emphasis on sustainability. Increasingly, data centre users and savvy operators are seeking to reduce their carbon footprints by being more energy-efficient and tapping renewable energy sources.

Investors should also be mindful of the geopolitical, regulatory and technological risks associated with data centre investments. It is therefore crucial for investors to collaborate with data centre partners who have a strong network, local expertise, and specialist domain knowledge.

To read the full research paper on data centre investment strategies in APAC, click here.

Launched in 2022, Perspectives is CLI’s series of thematic and topical research reports aimed at providing proprietary insights on real asset investment trends and strategies, private equity developments, macroeconomy and markets.

The post New research on APAC data centre investment strategies appeared first on Data Centre & Network News.

 

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