Data centres shine amid property gloom

Data centres shine amid property gloom

The data centre market is emerging as a bright spot in an otherwise gloomy real estate sector, according to a new report.

More providers have moved in on the back of rising demand from finance and tech companies, while the Government has also sought to develop the industry.

It is already a big business here. The market size is set to hit US$1.27 billion (S$1.82 billion) this year, up from US$936.2 million in 2014, according to Structured Research, a Toronto-based firm.

At least seven new data centres will be completed this year, representing about 116 megawatts (MW) of IT power supply - or about 47 per cent of total current stock by MW - said the report by Cushman & Wakefield (C&W).

"This presents an ideal scenario for tenants seeking better-quality data centres, or migrating from ageing facilities, as pricing will be competitive," said Ms Christine Li, director of research at C&W.

She noted that despite the new wave of supply, operators and landlords are still confident about take-up rates.

"We believe once the supply is fully absorbed, pricing might even start to trend up as early as the beginning of 2018."

There is about 248.5MW of supply across the roughly 50 data centres here, of which 163MW has been utilised.

Space is being taken up fast - absorption by square footage has risen at a 28 per cent compound annual growth rate since 2008, Ms Li said.

Some banks, including OCBC and Citi, have their own storage facilities, while others, including BNP Paribas and DBS, are understood to be using the services of Singtel, one of several data centre providers.

OCBC will relocate its data centre to a new facility early next year that will have three times the existing capacity, said Mr Eugene Lau, head of group technology services at the bank.

Govt pushing to develop data centre business in Singapore

Citi's centre at Science Park 1 started operating in 1994 and is now more than 70,000 sq ft, serving bank branches in 34 countries.

Ms Stacey Lacy, its head of operations and technology for Singapore and ASEAN, said a global organisation like Citi needs a data centre in a "strategic, safe and well-connected location" like Singapore.

On the tech front, Microsoft has a data centre here, while Google is building its second, which should be ready by the middle of next year.

A Microsoft spokesman said it will add new locations in response to customer demand. It has announced data centres for 28 regions so far.

Ms Li noted that the Singapore Government has taken a keen interest in developing the sector, with the Infocomm Development Authority, Economic Development Board and JTC Corporation teaming up to establish a Data Centre Park in Jurong to attract multinational corporations to set up operations.

Just Telin, which is part of Indonesia's largest telecommunications group Telkom, has taken possession of a greenfield plot there so far. Its facility is slated to start operating in December.

While average occupancy islandwide is about 70 per cent and could fall in the face of new supply, it should return to this level by 2018 and will soon become a landlord's market, said Ms Li.

"Increased compliance requirements on data security from the finance industry, along with exponential growth in data storage and management in a digital economy, should underpin medium-term growth," she added.

"As the Singapore market matures, it is unlikely to see another opportunity like this following this wave of new supply...

"It would be wise to lock in attractive pricing in the short term to prepare for the business in the next decade."


This article was first published on Jan 12, 2016.
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