AI-Driven Global Data Centre Surge Finding a Higher Gear in APAC: CapitaLand Investment

The rise of artificial intelligence is driving a buildout of capital-intensive digital infrastructure on a global scale, but nowhere is the story unfolding as rapidly as in Asia Pacific, according to CapitaLand Investment.

The region’s economies are growing faster and from a lower base than those in the West, plus they have a cultural affinity for digitised business and tech adoption, the Singaporean asset manager said in a report on data centre investment strategies.

In addition, APAC’s multitude of regulatory jurisdictions means users must comply with a larger number of country-specific data protection policies, propelling a shift towards greater localisation.

“Together, these factors are creating new opportunities for early-stage investment in what remains an emerging regional asset class,” said the report authored by Wayne Teo, senior executive for research at CapitaLand Investment, which is controlled by state holding firm Temasek.

Growth Swamps Peers

The internet user base in APAC has grown seven-fold since 2005, compared with growth of 1.9 times in the Americas and 1.8 times in Europe during the same period, according to the report, which cited research by the International Telecommunication Union.

“Going forward, APAC markets should continue to lead, as internet adoption further increases given the lower penetration rates in the region,” the report said.

In the investment market, APAC data centre transactions rose 2.4 times to $22 billion during the 2019-2023 period compared with the preceding five years, based on statistics compiled by MSCI, even as markets generally stagnated during the COVID-19 pandemic.

And while hyperscalers continue to drive data centre demand, a CBRE analysis suggests that APAC’s co-location market is poised to double in size to $52 billion by 2026, becoming the world’s largest co-location market ahead of North America’s forecast $29.7 billion and Europe/Mideast/Africa’s expected $19.3 billion.

Indian Hot Zone

A robust uptake of digital technology and a rapidly growing internet user base have made India a data centre hotspot, according to CapitaLand Investment, which develops server-hosting facilities in the world’s most populous country via SGX-listed CapitaLand India Trust.

India’s seven major markets — Mumbai, Bengaluru, Chennai, Hyderabad, Delhi NCR, Pune and Kolkata — are the focal points for new data centre development, with Mumbai standing out as the pre-eminent hub with 51 percent of the country’s capacity, the report said.

Other factors contributing to India’s growth momentum include high urbanisation rates, a burgeoning ecosystem of skilled IT professionals and ample availability of power.

With the world’s second-highest number of mobile subscribers and one of its lowest internet penetration rates, market dynamics indicate a long runway for growth in the local data centre market, the report said.