New data center investment and construction could slow down in 2027 in Selangor, Malaysia due to water constraints, a research house said in a note yesterday.
“As water supply is assessed at the pre-investment stage, limited headroom over 2027–2029 may slow approvals of new water-intensive projects, potentially leading to a temporary moderation in new data centre construction awards in 2027,” BIMB Securities Research said.
As current construction of data centers takes about 18 -24 months for completion, BIMB expects new award activity to pick up again from 2028 due to the completion of Langat 2 Phase 2 water treatment and distribution system, in 2030.
Selangor state water utility, Air Selangor has a planned 2,360 million litres per day (MLD) water treatment plant (WTP) pipeline which could expand capacity by about 37 per cent through 2031. However, this could only support organic growth and projected data center water requirements of 632 MLD, resulting in tight near-term supply. The National Water Services Commission (SPAN) stipulates a 15 per cent reserve margin for water supply in the state.
The earliest completion of a WTP in the state is the Rasau WTP Stage 1 with 700 MLD capacity which is expected to go onstream in 2027. But BIMB noted that this new capacity will be absorbed by organic growth demand which averages about 3 per cent per year.
Despite the near-term tight headroom, the research house said the completion of Langat 2 Phase 2 (760 MLD) in 2030 and Rasau Stage 2 (700 MLD) in 2031, will lift data center headroom to 523 MLD in 2030 and 931 MLD in 2031 respectively.
In the long-term, continuing investment in WTP construction and pipeline replacements will ensure demand can be accommodated while near-term constraints can be mitigated by lower-water cooling designs, reclaimed water supply, or a shift to other states such as Johor, BIMB said.