DATA CENTER INVESTMENT - A RARE OPPORTUNITY FOR THE RIGHT INVESTOR - INSIGHTS INTO ACTION - Cushman & Wakefield
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A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION DATA CENTER INVESTMENT A RARE OPPORTUNITY FOR THE RIGHT INVESTOR OCTOBER 2017 INSIGHTS INTO ACTION
A CUSHMAN & WAKEFIELD
RESEARCH PUBLICATION
INSIGHTS
INTO
ACTION IS THE DATA Despite a large
amount of supply
CENTER THE coming through
2015–2016, the data
NEXT BEST center market in
Singapore continues
INVESTMENT to lead some of its
large neighbors in the
ASSET CLASS? Asia-Pacific (APAC)
region in a race to the
YES, BUT NOT top of data center
FOR EVERYONE location rankings.
According to Cushman & Wakefield’s
Data Center Risk Index, Singapore
is the most robust market out of 10
Asian countries in terms of business
operations for data centers. Out of 10
Asian countries included in the index,
Singapore scored 84.50 out of 100,
ahead of Korea (83.23), Hong Kong
(78.73) and Japan (76.48).
The Data Center Risk Index identifies
the top risks likely to affect data center
business operations. It considers such
criteria as energy, internet bandwidth,
Asian Data Center Location Ranking ease of doing business, political stability,
natural disaster and energy stability.
Singapore is
1 2 3 4 5
Singapore ranks strongly for network
infrastructure, diverse connectivity to the most robust
market out of 10
major APAC markets, its pro-business
environment and political stability.
SINGAPORE SOUTH KOREA HONG KONG JAPAN AUSTRALIA
Asian countries in
84.50 83.23 78.73 76.48 68.18 terms of business
6 7 8 9 10
operations for
data centers.
MALAYSIA THAILAND INDONESIA CHINA INDIA
66.86 59.55 51.81 50.22 47.84
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A CUSHMAN & WAKEFIELD
RESEARCH PUBLICATION
Explosive
Growth
in Data
Creation
and Storage Explosive growth in data creation and of capacity, with
Singapore data
More than 2.5 exabytes – that data storage is set to continue in the
foreseeable future. Recent reports
center capacity a current total
supply of 370
expanded by
is, 2.5 billion gigabytes (GB) – show that Asia Pacific’s data center
market will increase significantly and
130MW in the megawatt (MW)
of IT power
last two years
of data are generated each day even surpass the European market by supply among
2021. Driving this increase is a surge co-location
worldwide in the form of emails, in data consumption in the region. operators. Around 59 MW of IT power
documents, presentations, Mobile data usage, in particular, has
increased in Asia Pacific in recent
is readily available for data center use,
and 103 MW can be converted into
images, videos and voice years. In 2016 alone, the region
reached 3,109,117 terabytes in mobile
IT power within three to six months
should demand keep pace.
recordings. Data centers serve data consumption per month. And
it is expected to reach 22,845,908
Singapore has seen an influx of new
as the backbone of systems that terabytes per month in 2021.
data center capacity in the last two
years, with an additional 130 MW on
facilitate the swift transmission Singapore currently sits at the top of
the APAC data center market in terms
top of the existing capacity of 240
MW at the beginning of 2015.
of this data 24/7 – a necessity
in the digital age.
How Data Centers are Connected with Users
90%
of the world’s data USER DEVICE ROUTER INTERNET INTERNET SERVERS
was created in the Mobile, laptop, tablet Networking device
SERVICE
PROVIDER (ISP)
BACKBONE
Where all content
last two years
that forwards data Data routes that or data is stored.
packets from one Connects users to exchange Internet Data centers are
router to another internet backbones, traffic between large-scale storage
through networks which are the largest the countries and facilities for servers
until they reach connections on the continents, and
destination nodes internet across oceans
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A CUSHMAN & WAKEFIELD
RESEARCH PUBLICATION
SINGAPORE There has been some price and asset class. Data centers present Closer to home, tycoon Oei Hong Global internet companies and
DATA CENTER vacancy pressure, particularly a fast-growing and appealing Leong is investing US$5 billion (S$6.73 third-party providers are driving
CAPACITY among smaller data center players. investment asset class, that is billion) to set up a new company,
However, over the medium to long
attracting huge interest in the US and named One Belt One Net, that will data center deployment
in Europe, the Middle East, and Africa build data centers, procure equipment
term, Singapore should be able to
(EMEA), particularly from institutional and machinery, develop software,
370 expand its capacity by another 100
MW on the back of the Smart Nation
investors. ICONIQ Capital, the wealth
manager to Silicon Valley billio-
and recruit and train employees. Oei
expects the data storage business in
DATA CENTER
CAPACITY
CAGR
megawatts initiative, as the government pushes
naires such as Facebook CEO Mark Singapore to benefit from China’s Belt (millions of sqm) 39%
for a national digital transformation
Zuckerberg, LinkedIn chairman Reid and Road Initiative, led by Chinese 20
Maximum data center program. Local data center providers
Hoffman and Napster co-founder President Xi Jinping to promote infra-
capacity in Singapore such as Singtel, Keppel Data Centres
Sean Parker, has moved quickly in its structure development spanning Asia, 22%
today and ST Telemedia stand to be the
entrance into data center investing. the Middle East and Europe. 16
primary beneficiaries of this, while
According to Data Center Frontier,
the international data center There has also been an interesting
a growing number of lenders and
providers will continue to focus shift in demand for data centers 2
100 equity investors are focused on 4%
on winning international deals from since 2016. Cloud operators have 4
the performance of data center
megawatts medium to large enterprises coming since overtaken banking clients to
developers, who are being boosted
into Singapore. be the largest occupiers of data
by demand for server space from 57
centers. While the healthcare, banking 42 Global Internet
Future expansion Investment in Data Center major cloud computing platforms.
and financial services sectors tend to companies
of capacity over Safanad, a global private equity
Set to Leapfrog firm based in London and Dubai,
treat data centers as a cost function,
the medium term Third-party
cloud operators view data centers
Increasingly, investors are looking has recently made an equity providers
as revenue-generating. Hence, the
beyond the traditional real estate investment in Central Colo.
expansion of the cloud operators 2010 2017 Enterprises
Sources: IDC; BroadGroup; Cisco; BCG analysis.
Note: Only includes white space. Numbers have been rounded.
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A CUSHMAN & WAKEFIELD
RESEARCH PUBLICATION
Cap Rate Comparison across Different Asset Classes
HIGH-END GRADE A OFFICE HOSPITALITY PRIME RETAIL DATA CENTER INDUSTRIAL
RESIDENTIAL
3% 3.3% 4.5% 4.7% 6.5% 6.8%
Source: Cushman & Wakefield Research
tends to be more aggressive retail, hospitality and residential.
compared to traditional data In the current low interest rate
center users, as businesses ramp environment, the spread between
up efforts to transition to cloud the interest rate and the cap rate
by 2020. A report by International is large enough to continue to
Data Corporation (IDC) forecasts attract investors into the data center
that spending on IT infrastruc- business. In the US, data center cap
ture products such as servers and rates have experienced compression
enterprise storage will increase by in view of increased investor interest,
18% this year, reaching US$44.2 the low interest rate environment and
billion. Of this, majority (61%) will the superior quality of data center
come from public cloud data centers assets. The cap rates for data centers
while private cloud will contribute in US have come down from 7.5% in
15% of the spending. In fact, every- 2014 to 5.5–6% in 2017.
thing stored in the cloud is backed
Data center investment is not for
by a data center. The exponential
everyone, however. The construction
growth of cloud
costs for new data center can run
computing is
from US$100 million for a multi-
expected to drive
Cloud operators demand for data
tenanted facility to as much as
US$1.5 billion for a cloud campus
have since overtaken centers over the
housing several buildings. This
medium term.
banking clients to be certainly sets a fairly high barrier to
In addition, due to entry. While it is a niche market for
the largest occupier the huge upfront investors, in which a limited pool
for data center. investment of buyers is expected. The high
required to barrier to entry also helps to keep
establish data competitors at bay.
centers, occupiers tend to be stickier
Investment opportunities also
than those in the traditional asset
encompass building new facilities
classes. On the supply front, data
and sale-and-leaseback of existing
center supply in Singapore will
premises, as well as buying operating
grow by 15 - 18% in the next year.
businesses. However, as end-users
Cushman & Wakefield estimates
are also becoming savvier, differen-
that data center occupancy rates
tiation in data center offerings and
will reach 70% by the end of 2018.
locational attributes have become
As operators are not required to fit
increasingly important for co-location
out data centers immediately upon
users. The entry of multinational
building completion, it allows them
companies, the establishment of
the flexibility to ramp up their supply
their own data centers and their
to accommodate new orders.
network presence within third-party
Data centers typically have higher data centers will certainly create an
capitalization rates (cap rates) than ecosystem and boost
traditional asset classes such office, interconnectivity.
8 | DATA CENTER INVESTMENT 9
INSIGHTS
INTO
ACTION
For further info on data centers, please contact: For C&W research, please contact:
LYNUS POOK 卜星元 CHRISTINE LI 李敏雯
Associate Director Director
Data Center Advisory Group, Singapore Research, Singapore
+65 6232 0845 +65 6232 0815
lynus.pook@cushwake.com christineli.mw@cushwake.com
SHAUN POH 傅子伟
Executive Director
Capital Markets
+65 6535 3232
shaun.poh@cushwake.com
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live.
Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining
our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield
is among the largest commercial real estate services firms, with revenue of $6 billion across core services of agency leasing,
asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ
Investors), project & development services, tenant representation, and valuation & advisory. The year 2017 marks the 100-year
anniversary of the Cushman & Wakefield brand. 100 years of taking our clients’ ideas and putting them into action. To learn more,
visit www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter.
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