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Hong Kong, Singapore build stronger data centre hubs despite land limits

But lack of space for expansion remains challenge for top 2 Asian markets 

Hong Kong and Singapore have held their own as amongst the leading destinations for data centres in Asia and the world in 2022. Admirable as their feat stands amidst the lack of available land, how these markets sustain their growth with such limited space for expansion is a question worth answering.

In Cushman & Wakefield’s annual Global Data Centre Market Comparison report, Hong Kong ranked as the world’s fourth leading data centre market, climbing two places up. It followed Singapore, which slipped one place to third. Hong Kong and Singapore are the lone Asian markets to reach the top ten, a roster dominated by data centre markets based in the United States. 

“Singapore and Hong Kong have reaffirmed their reputation as top data centre markets globally, despite a lack of available developable land, with Singapore’s new development parameters and Hong Kong’s generally high land prices,” the report read in part. The report was authored by Vivek Dahiya, Managing Director & Head, Data Centre Advisory Team, Asia Pacific, and Jacob Albers, Research Manager at Cushman & Wakefield.

“Both have strong ecosystems, excellent connectivity, consistent demand, and all major cloud services available and expanding where possible.” 

Cushman & Wakefield ranked the markets according to 13 weighted categories, which consist of high-weight criteria – market size, fiber connectivity, cloud availability; mid-weight criteria – incentives, taxes, political stability, vacancy, development pipeline, sustainability, and smart cities; and low-weight criteria – power cost, land price, and environmental risk to determine the top overall markets as well as the top performing markets in each category.

Hong Kong rated highly across the categories and emerged particularly strong in terms of connectivity, consistent demand, availability of cloud services, and its business-friendly tax structure offsetting its high land prices.

Singapore, meanwhile, showed a strong performance with a low vacancy rate, which reflects the high demand. Its low environmental risk and its status as a smart city also helped cement its rank despite its recently-lifted two-year moratorium on data centre development that further limited stock. 

Cushman & Wakefield noted the ones that ranked low are either smaller markets that have yet to grow in capacity or markets hindered by environmental, cost, or regulatory hurdles. 

Environmental risks are relatively low in Hong Kong and Singapore, further underpinning their positions as major data centre markets. 

“Singapore succeeded in locating data centres entirely outside of floodplains, ensuring that they are free from the risks of tornadoes, hurricanes, and earthquakes. Similarly, Hong Kong is one of the few studied cities with the lowest earthquake risk,” the report also noted. 

“This ensures that these markets’ data centres can maintain uptime, even if other sectors of the economy are disrupted due to environmental risks.” 
 
Limited land supply 

Cushman & Wakefield expects that Hong Kong and Singapore will maintain their lead in the short term, particularly due to their strategic economic and geographic importance. 

“Both Singapore and Hong Kong also face a lack of suitable land for the development of data centres and, despite the end of the moratorium in Singapore, the government’s selective approach to new data centre development has restrained the growth rate,” Cushman & Wakefield reported. 

In 2022, Singapore lifted the moratorium on data centre development, putting in place a set of new guidelines for more responsible development, energy usage, and sustainable practices. The low taxes and easing of restrictions allowed Singapore to record low vacancies of 2% during the year. 

The market could also benefit from new cooling technologies, and novel data centre designs, such as floating or aquatic facilities.

Markets to watch

Land availability and high land costs are also amongst the key factors that have impacted emerging markets in the region. 

Cushman & Wakefield suggests this could be addressed by a combination of expanding to peripheral submarkets and through novel solutions, such as highly vertical, high-density designs, or aquatic data centres. 

In addition, an increase in renewable energy capacity as well as incentives could also help support data centre development in other Asian markets. 

After Singapore and Hong Kong, Sydney and Seoul tied as the third leading data centre in the Asia Pacific region. This is followed by Greater Tokyo, Beijing, Mumbai, Shanghai, Melbourne, and Kuala Lumpur. 

The report, in particular, noted that Mumbai and Greater Seoul will likely witness continued interest and investment from data centre firms in the coming years, whilst India, Malaysia, and Indonesia will likely see between two and three times more capacity in the next three to five years. 

Moreover, Greater Jakarta, Bangkok, Manila, and Ho Chi Minh are also amongst the emerging markets in the region as these represent central digital infrastructure and connectivity clusters that could lead to significant opportunities for data centre providers to address significant populations which are increasingly becoming connected to the internet.  
 

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