The data centre business in Malaysia, which was a developing trend during the Covid-19 pandemic time, is projected to rise consistently in the coming years, which will have a beneficial impact on the local real estate sector, an industry expert said.
"As a real estate asset class, data centres are about much more than just bricks and mortar. Data centre projects necessitate expertise in areas such as real estate and digital infrastructure," he told NST Property.
He said that the data centre market has expanded rapidly in recent years as a result of increased internet usage in commerce, social media, entertainment, and cloud adoption.
According to him, the pandemic has accelerated the migration to cloud infrastructure as companies seek business agility and development in digital services.
The boom in data centre demand has aroused the interest of a wide range of investors, including growth capital, buyout, real estate, and, increasingly, infrastructure investors.
Malaysia's data centre market witnessed significant demand from cloud service providers such as Microsoft and Amazon, as well as other globally prominent data centre operators like Vantage Data Centres, Bridge Data Centres, and local operators, including AIMS Data Centre and TM ONE.
According to DCByte Ltd managing director (Apac) James Murphy, much of the take-up in the Malaysian market is due to the expansion of data centres in Kuala Lumpur and Johor.
He said that throughout the pandemic, Kuala Lumpur's data centre supply increased by 250 megawatt (MW) from 60MW in 2012 to 2019.
In Kuala Lumpur, the early colocation operators such as CSF Group, Basis Bay and VADS were the early movers in the market until NTT GDC, as one of the earliest foreign entrants, established a data centre campus in Cyberjaya in 2010.
From 2010 onwards, most international operators entered Kuala Lumpur's market via acquisitions.
In 2012, Keppel Data Centres acquired an 80 per cent stake in a Basis Bay facility located in Cyber Point 5 through its Securus Data Property Funds. In 2018, Bridge Data Centres, a subsidiary of ChinData, acquired the CX2 facility from CSF Group.
Within greater Kuala Lumpur, Cyberjaya emerged as the key data centre hub serving the rest of Malaysia. Affordable land prices, reliable power infrastructure and proximity to the capital city originally drew data centre operators to this location, along with the government's plans to attract tech hubs to this city adjacent to the new administrative capital of Putrajaya, according to a report by Knight Frank Malaysia.
Murphy said that ohor is becoming an increasingly important location for data centres in Malaysia
and a viable alternative hub for Southeast Asia.
This recent surge of interest can be attributed to the capacity constraints on data centres in Singapore, leading to an overflow demand.
Due to its close proximity to Singapore, favourable support from local authorities, and availability of land and power, Johor is an attractive location for
those seeking an alternative hub.
"In 2020, there wasn't anything interesting happening in Johor's data centre market. But in 2021 and 2022, we started seeing huge amounts of developments. What's different in Johor compared to other markets is that the data centres are being built at a speed of about 12 to 15 months instead of the regular 18 to 24 months," he said.
Key data centre developments in Johor include JB1 by Open DC, Iskandar Puteri Core Data Centre (IPDC) by VADS Berhad, Sedenak Tech Park by Yondr Group, and SEA Data Centre by YTL Power International Berhad.
YTL Power will spend RM15 billion to develop its 500-megawatt YTL Green Data Centre Park in Kulai, Johor. The first phase is the SEA Data Centre for Singapore's Sea Ltd with YTL Power investing RM1.5 billion in the development.
The Sea Data Centre is targeted to be completed by the first quarter of 2024. The three-storey green facility will feature 24 data hall suites, M & E rooms, office space, storage, and parking facilities.
Yondr Group is developing a 200MW hyper scale campus on a 72.8-acre parcel acquired from TPM Technopark Sdn Bhd, a wholly-owned subsidiary of Johor Corp. The land is located in Sedenak Tech Park, a flagship data centre complex that spans 700 acres of land, nestled in the heart of the 7,290-acre industrial and technology hub, Sedenak Technology Valley.
According to Knight Frank Asia associate director of data centre lead (Asia Pacific) Fred Fitzalan Howard, Malaysia's strong gross domestic product (GDP) growth figures (8.7 per cent) compared to peers, combined with newly-announced cloud regions for Amazon Web Services (AWS) and Google, has resulted in the country being a leader in the Southeast Asia Five (SEA-5) market.
Malaysia, he said, leads the Knight Frank SEA-5 Data Centre Opportunity Index, which looks at important markets in Malaysia, Indonesia, Vietnam, the Philippines, and Thailand.
Howard said although the Philippines and Vietnam are larger in population, they are lacking in terms of GDP growth, which makes hyper-scalers hold back from investing in these markets.
"The transparency of doing business in these markets is also a lot smaller. Malaysia and Indonesia are very much charging ahead of these two markets and with more big names coming in, it is no surprise that the Malaysian data centre market might overpower other leading regions," he said.
Malaysia ranked as the top SEA-5 destination for data centre investment, with 113 megawatts (MW) of take-up in 2022 and a 20 per cent supply growth predicted for the next five years.
This was revealed by panellists at the Malaysian Data Centre White Paper report launch event hosted by Knight Frank (Malaysia) Sdn Bhd on April 12.
Howard said that the white paper gives some insight into what is happening in two significant areas for data centre investment in Malaysia.
He said Kuala Lumpur is seeing high cloud demand, with Western hyper-scale providers announcing the creation of cloud regions in the last year.
"We wanted to touch upon the growth opportunity in Johor, not only through spillovers from Singapore but also as the upcoming regional hub for data centres for Western and Chinese hyper-scale service providers," he said after the launch here recently.