Hong Kong’s maturing data centre market
Hong Kong DC market is seeing a transformation in the next decade.
Since the first launch of smartphones in 2007, data usage has grown substantially across the globe. With surging demand for data, the Hong Kong government started to study the potential economic benefits of developing data centres (DCs) in 2011. In 2013, the government sold its first industrial land in Tseung Kwan O for DC usage.
The current stock of DCs in Hong Kong has reached 7.4 million sq ft (an estimated 577 MW critical IT load), with Tseung Kwan O as the leading DC cluster. The most recent notable completion was Goodman’s Tsuen Wan West DC Hub, redeveloped from the Central Textiles factory site. The cluster comprises four buildings, providing 1.6 million sq ft with 400 MW total power capacity. The newly formed DC hub reigned as the largest in Hong Kong and could be marked as a milestone of Hong Kong DC development after a decade of expansion.
With the relatively lower energy cost and low risk of natural disasters, Hong Kong is considered a suitable location for establishing and operating DCs, let alone its geographical proximity and close connection with China. Being a strategic location for DC operators, the city will welcome more data centres in the next decade. According to JLL Hong Kong Research, about 1,098,500 sq ft (GFA) of DCs will come on stream in 2023, adding 15% to the existing stock with about 63MW of critical IT capacity.
Considering the supply in the next ten years, the local DC market is showing signs of maturing with a more diversified background of capital sources. Originally an operator-led industry, telecommunication operators owned 83% of the total GFA in the existing stock. Yet, operators’ market share will reduce to 44% of the total GFA in future projects. Meanwhile, the industry is seeing an increasing share of developers and institutional investors, rising from 4% to 27% and 13% to 29%, respectively, in the coming ten years. Such transformation in investment capital will likely broaden the scope of the DC market going forward.
As of today, the DC market in Hong Kong continues to draw keen interest from institutional investors and DC operators due to robust data processing demand, demonstrated through the high pre-commitment rate of recent DC completions. SUNeVision’s MEGA Fanling achieved 100% pre-commitment, while Goodman’s DC cluster achieved 86% pre-commitment with their first facilities fully leased to two global firms. In addition, GDS’ first Hong Kong DC, HK1, attained a 96% pre-commitment before its completion in 1Q23. The high pre-commitment rates are proof that demand for DCs is exceptionally strong. Moreover, the popularisation of 5G and Hong Kong’s integration into the Guangdong-Hong Kong-Macao Greater Bay Area are expected to spur the uptick of such demand.