Demographics and demand driving Asia data center investment surge: MTD TV
The regional boom in data centers shows no sign of fading as mobile data usage and demand for hyperscale cloud services continue to rise, according to a panel of experts taking part in Mingtiandi’s Asia Data Centre Forum 2021.
Mingtiandi founder Michael Cole welcomed Varoon Raghavan, Princeton Digital Group’s co-founder and chief operating officer, and Jing Zhou, senior director with the alternatives and strategic transactions division at US investment manager Nuveen, on Tuesday for a discussion of the investment landscape in one of Asian real estate’s most dynamic asset classes.
Also joining the one-hour session, which was sponsored by Yardi, were a pair of seasoned deal advisors: Bob Tan, from the data center practice group of JLL’s capital markets team, and attorney Joel H Rothstein, a shareholder with Greenberg Traurig who leads the law firm’s Asia real estate practice.
With a JLL report forecasting the global market for hosting, storage and cloud computing services to reach $163 billion this year — up nearly 30 percent from 2017 levels — the guests on MTD TV were in agreement that the sector still has plenty of upside potential.
Hyperscaling Across the Map
“Hyperscalers are looking for data centers across the region,” said Raghavan, whose Singapore-based PDG has amassed 19 facilities in five Asian countries since starting up in 2017. “So there’s an opportunity to serve that growth and that demand, which is where operators like us and investors like Nuveen and others I’m sure are very excited about it.”
The former Tata Communications executive noted that despite the gold rush into the data center space, challenges exist in terms of building mission-critical facilities for clients and running them with high degrees of operational excellence, reliability and consistency across markets.
“I wouldn’t call it easy money, but I would certainly say it’s the smart money,” he said.
JLL’s Tan summed up Asia Pacific’s data center uprising with one word: population.
“At the end of the day, it is the population that is driving demand,” he said, adding that APAC’s population accounts for more than 50 percent of the estimated global count. “If you have to put it down to one single factor, I think it’s the continued growth of population in this part of the world, and the increasing rate of urbanisation, and along with that comes a lot of new goods and services and the digital economy.”
Tan cited corporate cloud services, social media, streaming content and gaming as further drivers of data use in the region.
Lawyers Kept Busy
Greenberg Traurig’s Rothstein was able to neatly quantify the sector’s impact on his property-focused legal practice, as he now spends 30 percent of his work time immersed in data center deals.
“You have all these new market entrants, new players that want to have exposure to this space, and yet they have to navigate something that’s totally unfamiliar to them,” the Tokyo-based attorney said. “If you look at a data center building, it just looks like an industrial building; but then when you look at it inside, it’s a completely different type of building.”
Beyond the arcane technical aspects of the data center world, the fact that Asian countries vary greatly in terms of development level means that some places lack a strong set of market standards for benchmarking investment deals, Rothstein said.
From her vantage point at fund manager Nuveen, Zhou sees investors becoming more sophisticated and knowledgeable about this complicated and multi-layered asset class.
“It can be as simple as an industrial shed, all the way to the mission-critical with the cabling and connectivities,” said the former portfolio manager for data center giant Digital Realty. “So for investors it really depends on which level you’re actually looking at on your investment strategy and your return.”
While Zhou agreed with the other panellists that interest in the sector remains strong, she said the biggest question is how to pick the right opportunity to suit one’s portfolio.
As published by Mingtiandi.
