Mainland China accounted for the highest proportion, with several major deals completed during the first six months. These included the acquisition of a 50% stake in Songjiang Internet Data Centre in Shanghai by GLP and GDS's purchase of a data center in Beijing from CITIC Group.
Data center transaction volumes hit a five-year high in 2020, due to accelerated digitalization as a result of the pandemic. With data center investment in the first six months of 2021 reaching 80% of last year's full-year investment, full-year data center investment volume is expected to surpass last year's benchmark as further major transactions are due to close in the second half of the year.
Data center demand in Asia Pacific is being driven by data security and sovereignty concerns, as governments tighten requirements around data storage. China's Data Security Law, effective on 1 September, has prompted corporates to construct facilities to store all locally generated data. Hyperscale cloud providers also added to expansion during H1 2021, with several major corporations signaling new facilities and availability zones in Mainland China and Hong Kong SAR.
Opportunities remain in tier 1 markets in Asia Pacific, with total data center net absorption in Tokyo, Sydney, Singapore and Hong Kong slowing to 70 megawatts (MW) in H1 2021 from 123 MW in H2 2020. Overall vacancy in these markets edged up to 14.6% as of June 2021, up from 13.9% in December 2020.
"What we're seeing now is a comfortable supply-demand situation as data center operators maintain a healthy vacancy rate of up to around 20% as a large buffer for expansion. Operators only plan new developments when their existing assets are 60-70% occupied. A facility with unsold capacity of 10% or less tends to be taken up by existing tenants rather than attracting new users," said Ms. Lim Chin Yee, Senior Director, Asia Pacific Data Centre Solutions, CBRE.
Total colocation capacity in tier 1 markets across Asia Pacific stood at 1.876 gigawatts as of June 2021, up 5.4% from December 2020 as more new projects are anticipated to come online in the second half of the year. Tokyo has the largest pipeline among the four tier 1 Asia Pacific data center markets over the next three years.
While investors can still be exuberant, the stabilized data center supply is not currently available to meet demand. Limited asset availability in the region is expected to somewhat temper direct data center investments. "The main acquisition opportunities for investors will likely come from some of the biggest data center owners in the region: telecommunications companies seeking to monetize their assets via sale and leaseback deals. While greenfield development is another possible entry route, this remains dominated by data center operators building their portfolios," said Mr. Tom Fillmore, Director, Asia Pacific Data Centre Capital Markets, CBRE.
"Due to the robust investor interest in this sector, we are also seeing participation through indirect channels such as partnering with operators, providing project financing, or through equity investments, such as Digital Edge's acquisition of a majority stake in Indosat following the relaxation of foreign ownership restrictions," Tom added.
Mr. Adam Bell, Head of Transaction and Advisory Services - Industrial and Logistics, CBRE Thailand comments, "In Thailand, CBRE sees an increased interest in the data center market. Currently the market is dominated by a handful of domestic players either alone or more recently as part of a joint venture with established regional data center operators. Land requirements for data center usage tend to be more specialized than general manufacturing, with a far broader range of requirements relating to high utility consumption and fiber optic connectivity."
Source: CBRE Thailand