Tech companies look to Asia for data centre needs
Amid rising demand for data, U.S. tech giants can find scaling up a challenge
The pandemic has ushered in digital transformations that were expected to take years, but were compressed into a few months, accelerating the need for more data centres.
To meet the exponential increase in demand, some of the world’s biggest tech firms and other data centre providers are turning to Asia Pacific, which is likely able to support rising global internet usage, whilst increasing download speeds for a rapidly expanding number of users in the region.
The market for hosting, storage and cloud computing in Asia Pacific is expected to grow by more than 150 percent by the end of 2021 when compared to 2019 levels.
“The market in Asia Pacific has been experiencing an unprecedented growth,” says Ralph Davidson, Executive Director, Head of Regional Industries, APAC, JLL. “Just a few weeks back, a tech company engaged our site selection services and within a few days, we were appointed to scope eight other sites around the region.”
For example, three U.S.-based tech giants were recently granted conditional approval to build and manage several hyperscale data centres (HDCs) and cloud services in Malaysia. China, India and Indonesia are likely to lead the regional growth story, according to JLL research.
HDCs are of particular interest. They’re the giants of the data centre world, either owned or leased by a single company, large in size, or both. More than 100 were built in 2020, taking the total global number to almost 600, according to a report from Synergy Research Group. Capital expenditure on data centres by the world’s 20 largest tech companies from January 2020 to September 2020 totalled US$99 billion, a 16 percent increase from the same period in 2019.
U.S. data centre providers are responsible for 40 percent of the world’s HDCs, of which many are choosing to build their own HDCs in Asia Pacific, while others co-locate in speculative developments. In April, the U.S.-based data centre developer, Equinix Inc., announced a joint venture to build data centres in Japan, which would be occupied by tech companies or other cloud providers.
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The biggest hurdles these companies often face when expanding into Asia Pacific is adjusting to design differences, says Brian Kortendick, Global Product Manager, Critical Environments and Data Centres, JLL.
There is a lack of land in premier data centre markets like Singapore. Companies have to build up, instead of out.
“The primary standards are still coming out of America, where you have these sprawling, horizontal buildings across the plains of Texas, which is similar to the western approach in Europe,” Kortendick says. “Companies expanding into Asia Pacific often need to be advised on how to build vertically and adjust to local regulations.”
“In Asia Pacific, data centres often need to be built in well-developed locations, such as within city industrial parks,” Davidson says. This is partly due to land constraints, and readily available power sources in the infrastructures built for cities, compared to most western countries.
“It’s not unusual for a data centre building in a market like Singapore to be as close as 15-20 meters from site perimeter,” he says. “The increased density requires different security measures.”
“When companies enter the market with a design in mind that is more typical to the U.S. or Europe, the materials and construction methodologies often don’t align to markets in Asia Pacific,” Davidson says.
“While 90 percent of the design can be standardised, the last 10 percent is key, and needs to align to the local market with a delivery and procurement strategy to ensure project objectives are achieved,” he says. “It’s better if the design is developed based on market conditions and available materials.”
Some markets in the region are so busy that pre-fabrication centres and steel mills have a wait time of up to a year, which creates challenges if not factored in during planning stages.
“Tech companies with carbon neutral goals sometimes find their operations in Asia Pacific to be the weakest link in the chain,” Davidson says. Key markets in the region, such as Singapore, Indonesia, and India, are tropical environments near the equator, where there are limited seasonal changes and generally hot temperatures. This limits the ability to use free cooling.
“Green power and sustainable solutions are limited in mature markets,” continues Davidson. “Governments are playing catch-up. Many markets have an overly conservative building code, which limits the opportunity to integrate more sustainable solutions. The same applies to local market expertise in operations and training of staff, which is why we prioritise our facilities management services in the region.”
A top consideration for companies expanding into the region is power sources, which differ in reliability from region to region. This focus, as well as speed to market, is different than it is in the U.S., “where it is all about inexpensive power and total cost of ownership,” Kortendick says.
Part of the reason that Japan is becoming a data centre hotspot is because companies are prioritising having stable power in a stable location over ‘cheap’ power. It helps that interest rates are at an all-time low.
So, despite the fact that Japan is one of the most expensive markets in Asia Pacific, it is a key data centre market as it is stable and in a good geographical location.