APAC data centre net absorption hits record high in 2020

Total net absorption doubled in Tokyo, Sydney, Singapore and Hong Kong SAR, reaching 322 megawatts (MW).

Asia Pacific data centre net absorption doubled in 2020,  reaching an all-time high – with Tier 1 markets, including Tokyo, Sydney, Singapore and Hong  Kong SAR, reaching 322 megawatts (MW). 

This is one of the key highlights in CBRE’s new Asia Pacific Data Trends H2 2020 report, a  half-yearly profile of data centre trends across the region.  

This jump in net absorption was driven by a pandemic-led surge in demand for video conferencing, online schooling, entertainment, social networking and platforms to support  remote working – spurring requirements for data storage, computing and networking over the  course of 2020. 

Singapore and Sydney registered the strongest demand, closely followed by Tokyo. Most  demand originated from hyperscale cloud providers, which contributed around two-thirds of  annual absorption. Among end-users, demand was led by gaming, over-the-top media  services, online content and streaming providers.  

Other major demand drivers include global technology services companies, which are catering  to growing corporate requirements for remote working and other virtual arrangements and  financial sector firms, which are also displaying a strong appetite for colocation requirements  and cloud storage. 

The report reveals that digital transformation is generating demand for data centre capacity  beyond traditional Tier 1 data centre markets. In developed markets, data centre operators are  seeking expansionary opportunities in other cities to reduce latency while enhancing local data  exchange efficiency. Demand in emerging markets such as mainland China, India and  Indonesia also continues to gain momentum. 

On the supply front, the four Asia Pacific Tier 1 data centre markets recorded unprecedented  growth in total colocation capacity in 2020, which increased by 17% y-o-y to 1,781 MW by year’s end, with the bulk of completions located in Sydney and Singapore. 2021 will see a  further increase in new completions, with several projects experiencing pandemic-induced  construction delays during 2020 finally scheduled to come on stream. Overall vacancy in Tier  1 markets continued to trend downwards over the year, falling to 13.9% as of the end of Q4  2020. 

Other key trends identified in the report included an uptick in demand for edge data centres, which are smaller facilities located close to users and serving a small, limited area. Potential Tier 1 edge data centre markets in Asia Pacific include suburban areas in Japan and Australia.  Requirements are also growing for remote management and/or remote hands services, which  allow customers to have real-time visibility on critical functions such as environmental controls,  physical security and network connectivity. 

“The COVID-19 pandemic has accelerated digital transformation across areas such as e learning, online shopping, content streaming and entertainment. Business continuity planning  has also prompted the rapid uptake of cloud adoption to support remote working. Looking  further ahead, the wider adoption of 5G, further digitalisation of healthcare and other  government services will be the primary demand drivers of data centre growth,” said Chin Yee  Lim, Senior Director, Asia Pacific Data Centre Solutions, CBRE. 

In the investment market, full-year transaction volume for data centre assets reached US$2.2  billion in 2020, the highest in five years. The year also saw a continuation of platform  formation and M&A deals for data centres, with upwards of US$5.0 billion deployed by  funding platforms and joint ventures across the region. 

“Data centres continue to lure investors keen to avail of the opportunities resulting from  massive demand for data storage and computation. The asset class also offers prospects for  diversification and enhanced risk-adjusted returns. With operational risk and securing planning  approvals remaining a challenge, CBRE advises investors to form partnerships with experienced  data centre operators, especially second tier groups looking to expand their scale and  capacity,” said Dr. Henry Chin, Global Head of Investor Thought Leadership and Head of  Research, Asia Pacific, CBRE. 

Download the full report here.