Hong Kong Accounted for 54% of the Total APAC Data Center Investment Volume in 2020YTD

Hong Kong also ranked the fourth most attractive data center location in APAC

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HONG KONG, CHINA – Media OutReach – 31 August 2020 – Investment into data centers in Asia Pacific (APAC) is on the rise with the total
transaction volume between 2018 and 2020 totalling USD 5.70 billion, 7.2x that
between 2015 and 2017. Despite the pandemic outbreak, investment activity in
the sector remains relatively robust with the total transaction volume in APAC
over the first eight months of 2020 reaching USD 1.43 billion, about 56% of the
2019 level.

 

Highly sought after by investors and owner-operators, Hong
Kong accounted for 54% of total investment into the APAC data center market in
2020 to date. Among the most notable transactions, China Mobile secured an
industrial government site for HKD 5.60 billion in July. The record high A.V. of
HKD 5,967 per sq ft was 56% higher than the closest bid; demonstrating the
eagerness of the buyer to secure a data center site amidst limited supply.

 

Hong Kong is an ideal data center location. According
to the latest research by Cushman & Wakefield, the city ranked the fourth most
attractive data center location in APAC, trailing Singapore, Sydney and Tokyo. Hong
Kong ranked highest in terms of low tax rate and low climate risks and ranked
in the middle in the categories of fiber connectivity, market maturity, and electricity costs. However, it scored poorly on its high real
estate costs.

 

As of end-2Q20, total data center stock in Hong Kong amounted to 7.9
million sq ft, of which 80% was dominated by 10 operators including the two
largest local operators — SUNeVision and PCCW Solutions (which account for 31% of
the market area). International operators collectively occupy around 30% and
Cushman & Wakefield expects the
proportion of these non-local operators in the market will continue to increase
over the near-term due to their pre-commitments of new projects in the supply pipeline.

 

Over
the next four years, a combined 4.2 million sq ft of supply will enter the data
center market. “Despite a 50% increase over the existing 7.9 million sq ft
stock, supply will remain tight as 82% of the
upcoming developments have already been taken up by owner-operators and tenant operators,”
said Mr Eric Chong, Cushman & Wakefield’s Associate Director of Research,
Hong Kong.

 

“Existing data center demand is supported by banking & finance,
insurance, and telecom operators. We expect future demand to be largely driven
by leading global cloud service providers such as AWS, Microsoft Azure, Google
Cloud, Tencent Cloud, and Alibaba Cloud,” Eric added. “The growing importance
of Internet of Things (IoT) applications, the impending 5G network, and fast
adoption rates of cloud computing as well as the post-COVID-19 ‘new’ normal are
the four major factors driving the surge in demand for cloud storage”. Based on
government statistics, 90% of corporates in the Finance, Insurance, Real Estate,
and Business Services (FIREBS) sectors have already adapted cloud computing, a significant
increase from 57% in 2015.

 

Power
shortages, however, are a major constraint on data center development. The existing
11kV power supply network cannot meet the power demand of hyperscale data
centers, which require a minimum of 20MVA + 20MVA. It usually takes power companies
about three to four years to provide the additional power supply which creates
a gap of 1.5 to two years between the target commencement date of data center
operations and delivery of the necessary power supply.

 

Going
forward, Cushman & Wakefield recommends the Hong Kong government and power
companies to swiftly investigate and coordinate on how to increase power supply
capacity and shorten power delivery timelines to ensure the infrastructure is
in place for future data center growth.

 

“To maintain the city’s data center market competitiveness, the
government should consider allocating more land lots for data center use to
satisfy surging demand. Another consideration is to standardize land premium
rates for lease modification applications to give investors and owner-operators
a predictable cost and timeline for data center redevelopment projects. The
government should also consider empowering a centralized government unit to
facilitate and streamline the application and approval process of the works
required for data center developments currently handled by various government
departments,” concluded Mr John Siu,
Cushman & Wakefield’s Managing Director, Hong Kong.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a
leading global real estate services firm that delivers exceptional value for
real estate occupiers and owners. Cushman & Wakefield is among the largest
real estate services firms with approximately 53,000 employees in 400 offices
and 60 countries. Across Greater China, there are 22 offices servicing the
local market. The company won four of the top awards in the Euromoney Survey
2017 and 2018 in the categories of Overall, Agency Letting/Sales, Valuation and
Research in China. In 2019, the firm had revenue of $8.8 billion across core
services of property, facilities and project management, leasing, capital
markets, valuation and other services. To learn more, visit www.cushmanwakefield.com.hk or follow us on
LinkedIn (https://www.linkedin.com/company/cushman-&-wakefield-greater-china)