Data centres in Asia Pacific are proving to be a more popular real estate investment choice than ever following inflows of $4.8bn in 2021, heralding a record year.
This was over double the previous high of $2.2bn in 2020 and surpassed investment volumes for the past four years combined, according to CBRE research.
The outlook for 2022 looks equally robust. “There is a considerable amount of capital looking to gain exposure to data centres as investors’ understanding of the sector matures,” said Tom Fillmore, director of Asia Pacific data centre capital markets for CBRE.
Transaction volume and fundraising activity is expected to remain strong, enabling data centres to rank as the most popular alternative investment for the third consecutive year in CBRE’s recent survey of real estate investor intentions.
Sector expertise growing
The rapid surge in demand for data is driving increased investor interest in Asia Pacific data centres, believes CBRE.
“We have already seen strong growth in recent years and the pandemic-driven digitalisation trend has really supercharged interest in the sector,” Fillmore explained.
“While opportunities will be limited relative to the demand that we are seeing, investors are pursuing the operational route by setting up dedicated platforms to secure higher returns.”
The second half of 2021 saw several large portfolio deals in the region. These included: DigitalBridge-backed Vantage Data Centres’ purchase of PCCW’s data centre portfolio in Kuala Lumpur and Hong Kong; and the acquisition of five data centres in Japan by Digital Edge and Stonepeak Infrastructure.
Regional differences
Tier 1 data centre markets saw vacancy hold steady at 14% across Greater Tokyo, Singapore, Sydney and Hong Kong, despite a six-month record supply of 305MW in the second half of 2021.
With Sydney constituting around 40% of the pipeline of the near-2,100MW of supply slated for completion by 2024, the Australian city is on track to become the region’s largest colocation market by 2024 in terms of data centre capacity.
In Singapore, data centre rents are expected to rise despite the lifting of the moratorium on new construction from the second quarter this year that would ease medium term availability. The 60MW per year cap on total capacity for new applications means that Singapore’s supply pipeline will lag other Tier 1 markets in Asia Pacific, according to CBRE.
The Greater Tokyo region is expected to see balanced demand-supply despite the completion of 200MW of new supply in 2021. Operators seeking geographical diversification outside Greater Tokyo are eyeing Osaka and other regional cities, causing rents to hold steady.
In Hong Kong, rents and vacancy are also expected to hold firm as corporate end-users and hyperscale cloud providers remain on the sidelines while near-term supply remains limited.
