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Malaysia’s data centre market remains strong, says JLL

Malaysia’s data centre market remains strong, says JLL

18 Aug 2022

The data centre market in Malaysia, which was a rising trend last year, is expected to witness steady growth in the upcoming years, according to real estate service firm JLL in a webinar titled “Data Centre as the New Real Estate Deal” held on Thursday (Aug 18).

JLL senior director of capital markets, KL Eng, said the data centre sector in the country has expanded rapidly in recent years due to increased internet usage.

“The use of the internet in commerce, social media, entertainment and cloud adoptions has become more extended during the Covid-19 lockdowns. The pandemic has accelerated the migration towards cloud infrastructure as organisations look for business agility and growth in digital services,” said Eng.

Besides internet usage, he added that the Malaysian government’s MyDigital Framework, which encourages companies and investments to venture into data centres and cloud computing, has also contributed to this rising sector.

The country’s data centre sector saw strong demand from cloud service providers such as Microsoft and Amazon as well as other globally prominent data centre operators such as Vantage Data Centres, Bridge Data Centres, and local operators like AIMS Data Centre and TM ONE.

Eng noted that there is an increasing pattern of data centre providers choosing to locate their data centre campuses outside of the more advanced developed markets of Hong Kong and Singapore, with Southeast Asian countries being the likely choices.

“In the past two years, hyperscalers have made various sizeable investments in Malaysia. Microsoft is set to establish its first data centre region in Malaysia, GDS [Holdings is] building a 54MW data centre in Johor, construction plans of Bridge Data Centres’ hyperscale campus in Johor is ongoing and we also have YTL’s Green Data Centre Park,” Eng said.

He also highlighted several factors leading to Malaysia’s position as the potential leading data centre market globally including the country’s existing regional hub for the manufacturing, logistics and big data analytics; lower electricity tariffs; adequate and affordable water supply for the cooling of data centres; tax incentives of up to five years by the local government; high literacy rates; free of natural disasters; and ample land supply at attractive prices.

When asked about data centre investors’ preference in terms of building and leasing, JLL Capital Markets (Data Centre) real estate practitioner Kent Seet said: “Generally data centre operators’ preference is to build them for their own use mainly because of IP and security issues. Regular office and retail buildings have very different specifications compared to what data centres require. A large majority of data centre operators start building only when they have secured customers and investors.”

In terms of entering the market and becoming an investor, JLL APAC Data Centre managing director Chris Street said there are two main models, building the centre and handling construction matters, and delivering services, including mechanical and electrical aspects.

Upcoming data centre hotspots in Malaysia will be predominantly in Selangor, mainly Cyberjaya, some in the fringe of Kuala Lumpur, Johor with KIDEX and Nusajaya Tech Park, and YTL Green Data Centre Park, Eng shared.

Eng concluded that Malaysia will continue to be a beneficiary of data centre expansions, with a convincing outlook for the upcoming years.

Source: The Edge Markets

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