Even as political uncertainties and the pandemic have played out incessantly throughout the year, data centre investment market in Hong Kong has remained robust.
Global real estate services firm Cushman & Wakefield, in a report has said that Hong Kong advances to the third most attractive data center location in Asia Pacific and is highly sought after by investors and operators.
Established data centre operators such as Equinix, PCCW, and SUNeVision continue on their new data centre facilities. Several new ones have joined the pack.
In May, APAC-focussed logistics asset firm ESR Cayman has made its first real estate purchase in Hong Kong to develop a new data centre. ESR has acquired land in Kwai Chung, situated in the New Territories of Hong Kong, which is the island city’s major data centre cluster.
Read: https://w.media/esr-cayman-hong-kong-data-centre/
Mapletree Investments acquired a site in Fanling at HK$813 million to debut their local data center construction project in Hong Kong, which is expected to be completed by 2023. Similarly, GDS has kicked off their first owned data centre project in Kwai Chung, which is expected to be completed in mid-2022.
In December 2020, Australian hyperscale data centre company AirTrunk has announced a ‘world-first’ dual opening of two new data centers in Singapore and Hong Kong, broadening its expansion into the Asia Pacific region.
At the end of Q1 2021, total data centre stock in Hong Kong amounts to 8.38 million sq ft, of which 80 per cent is dominated by 10 operators including the two largest (in terms of total floor area) local operators – SUNeVision and PCCW Solutions, which account for 30 per cent of the market area. Non-local operators collectively occupy around 43 per cent.
Existing data centre demand is supported by finance, banking, insurance, and telecom operators. With growing use of Internet of Things (IoT), 5G network, and cloud computing, as well as the post-COVID-19 working from home practice becoming a “new” normal, the market demand for cloud computing and storage surge rapidly.
Cushman & Wakefield expects the future demand of data center be largely driven by leading global cloud service providers such as AWS, Microsoft Azure, Google Cloud, Tencent Cloud, and Alibaba Cloud.
Cushman & Wakefield anticipates 4.16 million square feet of data centre supply by the end of 2025, yet the rate of construction has yet to meet the ever-rising demand for high-tier facilities.
Keith Chan, Cushman & Wakefield’s Head of Research, Hong Kong, said, “We notice that about 86 per cent of the upcoming supply has already been pre-committed by data centre operators, leaving only a small fraction of space available for future demand. In Hong Kong, it generally takes at least three to four years to build a new data centre. Therefore, we expect data centre supply is still in short in the medium term.”
Strong cable infrastructure
The cable infrastructure in Hong Kong has increasingly strengthened and been extensive and further fibre connectivity will soon link Hong Kong to other regional locations, Cushman & Wakefield said.
For example, the Asia Direct Cable (ADC) is scheduled to go live by the end of 2022, with no fewer than eight major telecommunications firms providing capital and know-how for the 9.400-kilometre system.
The cable will link Hong Kong to Japan, the Philippines, mainland China, Vietnam, Thailand, and Singapore. Also coming online next year is the Southeast Asia-Japan Cable 2 linking Hong Kong to South Korea, Japan, mainland China, Taiwan, Vietnam, and Thailand. The China Mobile Mobile-backed Hainan to Hong Kong Express cable will link Hong Kong to Hainan and Zhuhai, with operations commencing this year. Cushman & Wakefield expects that the Hong Kong data center market will continue to flourish in the future, with investor interest and absorption remaining at a relatively high level.
Power supply and land shortages
Land shortages and power supply could be issues confronting Hong Kong’s data centre development. The existing 11kV power supply network cannot meet the substantial power demand of hyperscale data centers. It usually takes power companies about four years to provide the additional power supply with 132kV power transformers, creating a gap of 18 to 24 months between the target commencement date of data centre operations and delivery of the necessary power supply.
Cushman & Wakefield recommends the government and power companies to swiftly explore and coordinate on how to increase power supply capacity and shorten power delivery timelines to ensure the infrastructure is in place for future development of data centre in Hong Kong.
Shortage of land supply remains one of the critical challenges to the future growth of the Hong Kong’s data center market. John Siu, Managing Director, Cushman & Wakefield, Hong Kong is of the view that in response to the shortage of land catered for data centres, the government may consider collaboration with Shenzhen at the Hong Kong-Shenzhen Innovation and Technology Park (HSITP) located in the Lok Ma Chau Loop for joint development of data center facilities for the Greater Bay Area.
“Besides, the government should also streamline the coordination across different departments, and accelerate the application and approval process of the works required for data centre development and reconstruction,” Siu added.
