Expected to grow at a 10.8% growth rate over the next five years, as reported by Structure Research, the Asia Pacific region has emerged as one of the most promising markets for data centres. This data growth is being fuelled by increased internet penetration, the exponential growth of mobile devices, rapid digitization, and the adoption of advanced technologies such as artificial intelligence and machine learning.
The COVID-19 pandemic has led to a significant acceleration in digital transformation as many businesses had to invest heavily in digital technologies to meet customer demand. According to a McKinsey study, globally, digital offerings have leapfrogged seven years of progress, and Asia Pacific has undergone nearly ten years of progress at the same time. According to a report by the Asian Development Bank, this acceleration will enable the region to reap “an economic dividend of more than $1.7 trillion yearly (equivalent to 6.1% of the 2020 regional GDP baseline) or more than $8.6 trillion over the five years to 2025”.
With this exponential growth comes several challenges, and with challenges, there are opportunities that the Asia Pacific data centre sector must address.
Dealing with An Uncertain Economic Environment
Home to some of the most diverse and fastest-growing economies, Asia Pacific is also grappling with the same economic uncertainty and headwinds seen around the globe. Ongoing trade tensions and regional conflicts continue to ripple, impacting supply chains and economic growth. In addition, many countries face rising inflation and debt levels, which could negatively impact business investment. A challenging business environment can be particularly problematic for data centre providers, who require significant investment and planning to build and operate their facilities.
Market Dynamics Make Leasing More Attractive
My colleague Kelvin Fong discussed how organisations have grappled with building their own data centre solution or leasing existing facilities. The high cost of capital in a rising interest rate environment makes building one’s own data centre solution less appealing. Land costs in constrained markets such as Tokyo, Hong Kong, Singapore, and Seoul continue to increase, leading to considerable up-front costs even before operations begin. In addition, supply chain constraints are likely to cause delays in getting new data infrastructure up and running. To meet the fast-growing demand, the largest cloud service providers have an opportunity to partner with data centre operators to ensure speed-to-market, take advantage of economies of scale in construction and operation, and their expertise in building reliable, efficient, and sustainable buildings.
Sustainable Investing – The New Normal
Given the amount of capital investment required for data centres and other digital infrastructure, coupled with the availability of new financing vehicles, many organisations are taking advantage of this and looking to sustainability-linked financing options. Various methods assist in achieving these requirements, including securing renewable energy to power a facility, ensuring recyclable and efficient supply chains to control emissions, utilizing greener cement to construct the building, and more. As many locations across the greater Asia Pacific region lack immediately accessible renewable energy, operators with close relationships with local utilities and other energy providers can speed the process toward a cleaner deployment.
EdgeConneX has adopted a “Green Framework” to guide its sustainability efforts, which includes four key pillars: energy efficiency, renewable energy, responsible operations, and community engagement. Recently, EdgeConneX successfully executed $3.3 billion in innovative sustainability-linked financing, which enables the development of critical digital infrastructure to support customers’ global data centre requirements. Read more about our successes here.
Continuing to Improve Data Centre Efficiency
Given the resource constraints in the Asia Pacific region and the obligation of countries to fulfil their commitments under the 2015 Paris Agreement, the development of data centres must prioritize sustainability alongside meeting the demands of the growing digital economy.
Developing best-in-class data centres, that prioritize sustainability, especially in the areas of resource efficiency and decarbonization, is essential to achieve these twin objectives Here data centre operators are in the unique position of moving ahead by implementing alternative cooling methods and lowering total operational costs through careful facility management. My colleague Chi Ling discusses this extensively in the context of Singapore in his article on how Singapore can sustainably grow its data centre sector.
Such data centres can contribute towards the economic and strategic objectives of respective countries while being mindful of their impact on the environment, ensuring the long-term viability of the data centre industry in the region.
Doubling Down on Talent
The exponential growth in the number of data centres in the Asia Pacific region has created a pressing need for a significant increase in the workforce. According to Uptime Institute, the number of staff required globally will reach almost 2.3 million by 2025. However, more than half of the respondents (53%) in Uptime’s 2022 Global Data Center Survey reported having difficulty finding qualified candidates, up from 47% in 2021 and 38% in 20182.
Attracting and retaining qualified data centre staff has been a persistent issue for the industry for several years. However, it is becoming an even greater concern as the demand for data centre capacity grows. My colleague, ThiamChye Sim, shares a roadmap for the region to close the data centre talent gap.
The Asia Pacific data centre sector is experiencing exponential growth and offers immense opportunities for businesses and economies in the region. However, with growth comes challenges, such as dealing with economic uncertainty, prioritizing sustainability, and attracting qualified talent. The sector must address these challenges and take advantage of opportunities to continue its growth trajectory to contribute to the region’s economic and strategic objectives while being mindful of their impact on the environment and ensuring long-term viability.