Hong Kong a desirable data center location despite political and pandemic troubles

Hong Kong's data center market remains strong despite political tensions and pandemic troubles around the world, making it the third most attractive data center region in the entire Asia Pacific region.

Real estate firm Cushman - Wakefield says Hong Kong is a location that is highly sought after by data center operators and investors.

The firm points to recent development and investment activity in the market, such as Mapletree Investment's HK$813 million site that will be home to a new data center by 2023. Other major data center providers including Equinix, GDS, PCCW and SUNeVision are all in the middle of data center projects.

As of the end of the first quarter 2021, Hong Kong has a total of 8.38 million square feet of data center space, 30% of which is controlled by 10 operators. PCCW and SUNeVision are the two biggest players with 30% of the space.

Trends such as remote working and growth in the financial services, insurance, telecommunications sectors, as well as internet of things, 5G and cloud computing growth, will help to boost the industry.

Cloud service providers will also contribute to the growth of data center demand. These providers include Alibaba Cloud, Amazon Web Services, Google Cloud, Microsoft Azure, and Tencent Cloud, amongst others.

Cushman - Wakefield estimates that there could be up to 4.16 million square feet of data center supply by 2025.

The company's Hong Kong head of research, Keith Chan, explains, "We notice that about 86% of the upcoming supply has already been pre-committed by data center operators, leaving only a small fraction of space available for future demand. In Hong Kong, it generally takes at least three to four years to build a new data center. Therefore, we expect data center supply is still in short in the medium term.

Data center operators will have to deal with major challenges, particularly in the areas of land and power supply shortages.

Cushman - Wakefield Hong Kong managing director John Siu says the land shortage could consider partnering with industry.

"In response to the shortage of land catered for data centers, the government may consider collaboration with Shenzhen at the Hong Kong-Shenzhen Innovation and Technology Park (HSITP) located in the Lok Ma Chau Loop for joint development of data center facilities for the Greater Bay Area. Besides, the government should also streamline the coordination across different departments, and accelerate the application and approval process of the works required for data center development and reconstruction."

Furthermore, the current 11kV power supply network will not be able to keep up with the amount of power that hyperscale data centers demand.

Cushman - Wakefield states that it can take up to four years to provide additional supply to data centers because they need to supplement this supply with 132kV power transformers. Such a delay will affect the planned opening dates of data center operations.

"Cushman - Wakefield recommends the government and power companies to swiftly explore and coordinate on how to increase power supply capacity and shorten power delivery timelines to ensure the infrastructure is in place for future development of data centers in Hong Kong.