Cushman & Wakefield (NYSE: CWK) released its fifth-annual Global Data Center Market Comparison Ranking, showing incredible growth for the industry across all global regions, and in both emerging and established markets.
“Despite commercial real estate and the overall economy facing mounting challenges, data centers have remained in strong growth mode as robust cloud demand and the initial surge of interest in AI deployments maintained confidence in the sector,” said Jacob Albers, Head of Alternatives Insights – Global Think Tank at Cushman & Wakefield.
A typical data center requires land, space, proximity to city centers for high efficiency, access to robust power supply and stable grid networks, and effective cooling systems to maintain the servers at optimal temperatures. Based on these criteria, demand for data centers tends to be concentrated in big cities with large populations.
Trang Bui, Country Head of Cushman & Wakefield Vietnam noted that data center operators seek sites near central locations to minimize data transmission delays and be closer to their customer base. “Sites close to business districts are expected to perform well and command higher rates,” she said.
But the influx of new data centers can pose challenge for the country’s power usage. “Power demand is rising, and supply is looking to keep up, but extensive upgrades to the grid are necessary to accommodate the transmission of the increased power demand and secure the grid. The potential growth of power-intensive sectors like memory chips and AI is also expected to strain the current grids.”
Despite potential challenges, Vietnam remains as a new frontier for data centres in Asia Pacific. It is poised for steady expansion as its neighbouring ASEAN markets witness growth, especially around AI, and as regional enterprises look further into Southeast Asia to combat the impact of rising costs in their local markets. Ho Chi Minh currently accounts for 50% of operational capacity in Vietnam.
However, the landscape is poised to change since the Vietnamese government announced the Law on Telecommunications that eases processes around data localization and cancelled foreign ownership caps for data and cloud providers to allow for foreign ownership in the country. These exemptions from the usual market entry constraints in Vietnam will entice more international operators to enter the market with STT Telemedia Global Data Centres who have announced a JV with VNG Corporation; South Korean industrial conglomerate, Hyosung Corporation; and Alibaba recently announcing plans or expressing interest in developing data centers in Ho Chi Minh City.
Viettel have announced that they have partnered with Singtel to develop a submarine cable connecting Vietnam to Singapore and Southeast neighbours, Cambodia, Thailand and Malaysia. The national telco are also planning for at least two Vietnamese-owned cables operational by 2030, prioritizing shorter routes to other Asia digital hubs to accompany the government in building and developing digital infrastructure in Vietnam. As such advances take place, Vietnam will become a more attractive market for data centre investment.
The sector as a whole still encountered its share of challenges, however, with the availability of power constricted in many major markets. As a result, data center operators have increasingly turned to either venturing into further outlying submarkets outside traditional data center clusters or expanding into secondary and tertiary markets around the world. Markets that only a few years ago were not present in any industry discussions have risen to the forefront and are seeing hundreds of megawatts (MW) in their pipelines.”
Highlights by Region – APAC
In the Asia Pacific region, Mumbai, Tokyo and Jakarta have jumped up the rankings as some of the most rapidly growing markets with each of them scoring well in market size, development pipeline and vacancy among a host of other factors. While costs and limited land availabilities have moved both Singapore and Hong Kong off the Global Top Ten Established Markets Ranking, both remain key markets in the Asia Pacific landscape and remain in the Regional Top Ten at #6 and #10, respectively. For emerging markets, Osaka, Hyderabad and Johor have benefited from high competition for sites in their nearby neighbors of Tokyo, Mumbai and Singapore.
“Hyperscale activity has continued to add significant capacity to pipelines across markets like Mumbai, Tokyo, Sydney and Jakarta. As with other regions, we are also seeing growing interest in smaller markets. Emerging markets including Osaka, Hyderabad, Johor and Bangkok in particular are seeing growth. At a country level, Singapore is on track to join mainland China, Japan, Australia and India as markets with over 1GW in operational capacity in 2024.” said Vivek Dahiya, Managing Directory & Head, Data Center Advisory Team, Asia Pacific, Cushman & Wakefield.