Data Centres: The New Frontier

“Data centres are the core infrastructure on which the

digital economy runs. As Singapore journeys to

a Smart Nation, it will require more uses of and reliance on data centres for areas such as cloud services, data analytics

and the Internet of Things.”

IDA SINGAPORE | 11 MAY 2015 ©2016 Cushman & Wakefield

NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IS MADE TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN, AND SAME IS SUBMITTED SUBJECT TO ERRORS, OMISSIONS, CHANGE OF PRICE, RENTAL OR OTHER CONDITIONS, WITHDRAWAL WITHOUT NOTICE, AND TO ANY SPECIAL LISTING CONDITIONS IMPOSED BY THE PROPERTY OWNER(S). AS APPLICABLE, WE MAKE NO REPRESENTATION AS TO THE CONDITION OF THE PROPERTY (OR PROPERTIES) IN QUESTION.

Data Centres: The New Frontier

Despite the across-the-board pessimism in the

real estate industry, data centres (DCs) seem to

be one unique segment that is booming with

lots of optimism. Singapore currently has the

largest data centre market in the Asia Pacific

region (even larger than UK, which is the biggest

market in Europe), owing to several attributes

which make it a conducive host country for data

centres. These include advantageous geographic

location, safe and dynamic business environ-

ment, stable power supply, and support from the

government. Singapore is also spared from nat-

ural disasters such as earthquakes and typhoons

which affect many neighbouring countries.

Based on C&W’s data, there is approximate-

ly 248.5 MegaWatts (MW) of IT power supply

collectively in Singapore’s data centres. Out of

which, 163 MW has been utilised, 55.1 MW has

been earmarked for future expansion and 30.4

MW is currently available. In addition, there will

be 115.9 MW of supply across seven DC new

facilities by December 2016 islandwide (with

additional two DC facilities being planned with

no specific timeline). This represents a whopping

46.6% of the total current stock by MW, which

presents an ideal scenario for tenants seeking

better quality DCs or migrating from ageing

facilities due to competitive pricing. Despite this

new wave of supply of DC facilities, operators

Data Centre Colocations Capacity: Regional Distribution

Colocation Revenue 2014 TOTAL

$963M(in USD)

Source: Structure Research

and landlords are still confident about the take-

up rates and C&W believes that once the supply

is fully absorbed, pricing might even start to

trend up as early as the beginning of 2018.

Singapore’s DC scene started with three ma-

jor operators: Equinix (SG1), Global Switch (Tai

Seng) and Singtel (Commtech) in the late 90s.

Being the first mover in this industry, they were

the gateway to global network providers via

international carriers. Equinix and Global Switch

dominated the MNCs, while Singtel attracted

most of the local enterprises and government

agencies. However, majority of the servers was

still housed within the office space until the late

2000s. Today, both Equinix and Global Switch

have the reputation as a “carrier hotel”, with up

to 200 telco carriers in each of their facilities.

At the time of the launch of iPhones came the

next wave of DC providers, namely, DRT (IBP),

Keppel (S25), Singtel (KC1), Equinix (SG2) and

1-Net (Chai Chee). Most of these providers have

248.5 MegaWatts APPROXIMATE IT POWER SUPPLY IN SINGAPORE’S DATA CENTRES

SENGKANG

9%NORTH$83M

32%WEST$310M

32%EAST$571M

SERANGOON

JURONG

4 | Cushman & Wakefield Data Centres: The New Frontier | 5

good occupancy given their strategic locations,

uptime availability and more importantly, their

good reputations in the market.

The more recent significant demand for DC

started in early 2010s when the Singapore gov-

ernment took a keen interest in developing the

sector further to cement Singapore’s position as

an infocomm technology and media hub un-

der the Smart Nation initiatives. As a result, the

Infocomm Development Authority of Singapore

(IDA), Singapore Economic Development Board

(EDB) and Jurong Town Corporation (JTC)

teamed up to establish a Data Centre Park (DCP)

in Jurong to attract multinational corporations

to set up premium DC operations in Singapore.

Till date, Telin has taken possession of a plot of

green field in the DCP, which is slated to com-

mence operation in December 2016.

Since 2011, Singtel (KC2), Tata, NTT, Keppel

(T25), Pacnet (110 PL), iO (AMK), and Century

Link have garnered more market share. Most

recently, with the completion of Keppel (T27)

and Equinix (SG3), the nationwide supply was

boosted to more than 248MW.

Demand for DC facilities has been robust and is

likely to sustain in the medium term. According

to C&W’s data, the compounded annual growth

rate (CAGR) of annual absorption by square

footage is 28% for the year 2008 through 2015.

In addition, based on Structure Research, Sin-

gapore colocation market size is likely to grow

from US$963.2 million in 2014 to US$1.265 billion

in 2016, clocking a 15% annual growth rate.

OPERATOR ADDRESS REGIONULTIMATE IT LOAD

CAPACITY (MW)

COMPLETION DATE

Singtel Yung Ho road West 36 Q4 2016

Telin Sunview Road West 12 Q4 2016

ST Telemedia /

StarhubAyer Rajar West 14 Q1 2016

ST Telemedia Defu Ave 1 East 12 Q2 2016

DRT Loyang Loyang Way (Brownfield) East 13.2 Q1 2016

Keppel T20 Tampines St 92 East 17 Q4 2016

1-Net Riverside Road North 12 Q1 2016

ST Electronics Ang Mo Kio North TBC TBC

Global Switch Gambas North TBC TBC

TOTAL

(9 DC facilities) 115.9

Source: Cushman & Wakefield Research

Pipeline Supply of DC Facilities

02008 2009 2010 2011 2012 2013 2014 2015

sq ft250,000

200,000

150,000

100,000

50,000

Data Centre Demand on the Rise Utilisation Trend

Source: Cushman & Wakefield Research Source: Structure Research

77.9%

60.0%

UTILISATION (POWER)

UTILISATION (RACKS)

81.5%

67.1%

85.5%

74.7%

6 | Cushman & Wakefield Data Centres: The New Frontier | 7

Artist impression of 1-Net North Data Centre (Provided by 1-Net Singapore Pte Ltd)

Average DC occupancy islandwide currently

stands at about 70%. With a large volume of

new supply coming online next year, occupancy

could fall further, but it should not be a cause for

alarm. Prices could bottom out quickly next year

due to the sustained demand from the growing

tech/network content companies (such as Face-

book, Netflix, Uber), major banks and insurance

companies outsourcing the data centres to be

compliant with MAS’ requirement on threat and

vulnerability risk assessment (TVRA). We expect

occupancy to be back in the 70% mark by 2018,

and it will soon turn into a landlord’s market with

positive rental reversions once the supply is fully

taken up over the next two years.

Moving forward, a combination of push and pull

factors will continue to drive demand for data

centres in the city-state. Increased compliance

requirements on data security from the finance

industry, along with the exponential growth in

data storage and management in a digital econ-

omy, should underpin the medium term growth

for the market segment. As the Singapore DC

market matures, it is highly unlikely to see an-

other opportunity like this following this wave

of new supply. It will therefore be wise to lock in

attractive pricing in the short term to prepare for

the business in the next decade.

Increased compliance requirements on data security

from the finance industry, along with the exponential growth in data storage and management in a digital

econ omy, should underpin the medium term growth for the market segment.

8 | Cushman & Wakefield Data Centres: The New Frontier | 9

Christine Li

Director, Research +65 6232 0815 christineli.mw@cushwake.com

Copyright © 2016 Cushman & Wakefield. All rights reserved.

Lynus Pook

Data Centre Advisory Group Broker +65 6232 0845 Lynus.pook@cushwake.com