According to Cushman & Wakefield, artificial intelligence (AI) and machine learning (ML) will drive data center real estate in 2024.
Despite macroeconomic uncertainties, the data center sector continues to attract strong investor interest. The growth rate in 2022-2023 with total load capacity in the Asia Pacific region exceeded 10GW. Cushman & Wakefield forecasts this growth momentum to continue in 2024, with 3.4GW of capacity under construction and 8.8GW in the pipeline.
According to the company, the past two years have seen a sudden increase in storage and processing demand from the AI and ML sectors, leading to a sharp increase in power consumption of data centers. As a result, both capacity and information technology capacity throughout the center have increased. Specifically, the average load capacity per rack has increased to 30-60kW and is expected to reach 100-125kW to meet AI demand. The overall capacity of the entire center, from 25MW-50MW, has increased to 100MW-300MW. The “boom” of the AI and ML sectors has quickly attracted investors to pour money into this segment.
The mature markets of Singapore, Tokyo, Sydney, Beijing, and Shanghai attract the most attention. Following are markets like Hong Kong, Mumbai, and Seoul. The main demand comes from cloud service provision to customers from banking, finance, insurance, telecommunications, e-commerce, and government.
Data center real estate attracts investor attention.
The emerging markets are also attractive with the growing demand from the domestic market. Specifically, global cloud service providers have planned to enter Auckland, Bangkok, Busan, Kuala Lumpur, Osaka, Pune, and Taipei; the fact that operators, developers, and colocation are interested in investing in these emerging markets will open up many opportunities for rapid growth in the coming years.
Compared to those markets, Vietnam is still a relatively young market. While major international cloud service providers have not yet set foot here, some international telcos have a presence through partnerships with local telecom companies. Projects implemented by local companies in Ho Chi Minh City and Hanoi, with a total capacity of 45MW, are small and medium-sized, and are growing at a CAGR of 6.63% in the period 2022-2027.
Cushman & Wakefield representatives also pointed out that Vietnam has a rapidly growing population, especially the middle class, urbanization, owning more than 80% of internet users, and actively applying digital technologies to banking and business activities. Despite having many advantages, Vietnam is the country with the least data center infrastructure globally in terms of population. This can put pressure on domestic investors, including construction perspective and scarcity of experienced human resources and supply chain logistics.
Ms. Trang Bùi, CEO of Cushman & Wakefield, believes that with the rapid growth rate, AI may reshape the data center market in the coming years. However, unlike traditional data centers that always prioritize the most favorable positions, AI and ML data centers can be built within 450 km to 1,000 km radius from major cities, focusing on areas with continuous power supply capacity.
Provinces in southern Vietnam may be preferred destinations thanks to abundant land, readily available power in industrial parks, and the largest bandwidth cable landing stations in the country located in Quy Nhon, Da Nang & Vung Tau. In addition, renewable energy accounts for 1/4 of the national energy structure, with various energy sources, of which the wind power and solar power industries have developed quite well.
For foreign investors, “Data Center Services Business” is a conditional investment and business sector under the 2020 Investment Law. However, until now, there have been no legal normative documents guiding in detail the business conditions for this industry and profession.
“We forecast that investors will continue to be interested in this ‘cake’, but the main concern will be in larger-scale projects rather than building many small facilities. The potential that the data center industry brings is very clear with the boom of AI and ML. Data centers will also play a vital role in supporting the digital transformation process nationwide. Therefore, although still in its infancy, we expect the data center industry to soon have effective investment attraction policies to serve the investment needs in the future,” said Ms. Trang Bùi emphasized.
