India a Key Market in Asia Pacific For Expansion of Data Centres, JLL Report
Investments in data centres will continue to grow in Asia Pacific with investor interest rising in the emerging markets of India, China, and Indonesia, leading real estate professional services and consultancy firm JLL said today.
According to a new report by JLL, India’s massive population base coupled with various government-led digital initiatives are likely to boost growth in the public cloud services market. The second largest country by mobile internet users, India’s internet economy is projected to double by 2020.
“Telecom companies shedding data centres and focusing on their core competence, cyber security, growth of content providers, outsourcing by startups, and regulators focus on keeping data within India are major factors for the growth of market for data centres in India. These along with the Government’s Digital India campaign that aims to transform the country into a digitally empowered economy is expected to push greater demand for quality data centres,” said Ramesh Nair, CEO and Country Head, JLL India.
With demand for data storage rising, many companies are looking to rent a share of facilities rather than own a centre. According to JLL research, revenue for shared or colocation data centres from Asia Pacific region is expected to overtake the U.S., rising to 40 per cent of global share by 2020.
Driven by the region’s rapid urbanization and adoption of e-commerce, Asia Pacific is experiencing a surge in data generated from various digital products and services.To cope with the amount of information, businesses are shifting towards storing their data on cloud services. Leading cloud providers such as Google, Amazon, Microsoft and Alibaba are competing to add cloud zones across the region, as Asia Pacific’s spend on public cloud services may hit US$15 billion in 2018.
“As the cloud market matures, organisations need to establish their infrastructure capacity quickly in order to keep up,” said Bob Tan, Director of Alternatives, JLL Asia Pacific. “We’re seeing more investors looking to enter or increase their exposure to the data centre sector as it offers diversification benefits and tends to have higher yields than traditional asset classes, such as office or retail.”
“Typically, investors have preferred these cities for their robust infrastructure, connectivity and relative ease of doing business. While these will remain as key markets, cities in China, India and Indonesia are emerging hotspots since they offer large population bases, high internet penetration rates and social media activity,” added Tan.
With the fastest growing data centre market in the world, China’s need for colocation space continues to be anchored by the country’s rapid fintech growth, digital transformation and reliance on big data analytics, says the report. JLL predicts that tier-two Chinese cities will also draw interest due to the availability of land and power, lower operating costs, and improving network and support infrastructure.
However, the report highlights that data centres are a unique asset class and market entry remains a challenge due to the lack of specialised expertise and knowledge in this sector.
Other ways to gain exposure are build-to-suit data centres or sale-and-leaseback of existing facilities. In the first scenario, investors engage with the operator at the initial stages and develop a new build based on their specifications. In the second, investors acquire existing data centres directly from the operator or end-user, but accord full operational control to them.
Looking ahead, Tan believes that data centres will continue to feature strongly on investors’ agendas. “We’re confident that prospects in Asia Pacific will continue to expand, with significant capital targeting the emerging markets. Given their large market size and potential, these destinations offer strong user demand and solid growth opportunities.”
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