Data Centres: The New Frontier - Cushman & Wakefield

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Data Centres: The New Frontier - Cushman & Wakefield
Data Centres:
The New Frontier
Data Centres: The New Frontier - Cushman & Wakefield
“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

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Data Centres: The New Frontier - Cushman & Wakefield
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                    248.5
                                                                                                                                                                        MegaWatts
                                                                                                          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             APPROXIMATE IT POWER SUPPLY
                                                                                                          to 200 telco carriers in each of their facilities.            IN SINGAPORE’S DATA CENTRES
                                                                                                          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

Data Centres: The New Frontier                                                                                  Data Centre Colocations Capacity: Regional Distribution

Despite the across-the-board pessimism in the       Based on C&W’s data, there is approximate-
real estate industry, data centres (DCs) seem to    ly 248.5 MegaWatts (MW) of IT power supply                                                                   9%
                                                                                                                                                                NORTH
be one unique segment that is booming with          collectively in Singapore’s data centres. Out of                                                             $83M
lots of optimism. Singapore currently has the       which, 163 MW has been utilised, 55.1 MW has
largest data centre market in the Asia Pacific      been earmarked for future expansion and 30.4
region (even larger than UK, which is the biggest   MW is currently available. In addition, there will                                                 SENGKANG
market in Europe), owing to several attributes      be 115.9 MW of supply across seven DC new
which make it a conducive host country for data     facilities by December 2016 islandwide (with           32%
                                                                                                            WEST
centres. These include advantageous geographic      additional two DC facilities being planned with         $310M           JURONG
location, safe and dynamic business environ-        no specific timeline). This represents a whopping                                                           SERANGOON
ment, stable power supply, and support from the     46.6% of the total current stock by MW, which
government. Singapore is also spared from nat-      presents an ideal scenario for tenants seeking                                                                                      Colocation Revenue
ural disasters such as earthquakes and typhoons     better quality DCs or migrating from ageing                                                                         32%             2014 TOTAL
                                                                                                                                                                                        $963M
which affect many neighbouring countries.           facilities due to competitive pricing. Despite this                                                                 EAST
                                                                                                                                                                        $571M
                                                    new wave of supply of DC facilities, operators
                                                                                                                                                                                                 (in USD)

                                                                                                          Source: Structure Research

4 | Cushman & Wakefield                                                                                                                                                         Data Centres: The New Frontier | 5
Data Centres: The New Frontier - Cushman & Wakefield
good occupancy given their strategic locations,      mence operation in December 2016.
uptime availability and more importantly, their
                                                     Since 2011, Singtel (KC2), Tata, NTT, Keppel
good reputations in the market.
                                                     (T25), Pacnet (110 PL), iO (AMK), and Century
The more recent significant demand for DC            Link have garnered more market share. Most
started in early 2010s when the Singapore gov-       recently, with the completion of Keppel (T27)
ernment took a keen interest in developing the       and Equinix (SG3), the nationwide supply was
sector further to cement Singapore’s position as     boosted to more than 248MW.
an infocomm technology and media hub un-
                                                     Demand for DC facilities has been robust and is
der the Smart Nation initiatives. As a result, the
                                                     likely to sustain in the medium term. According
Infocomm Development Authority of Singapore
                                                     to C&W’s data, the compounded annual growth
(IDA), Singapore Economic Development Board
                                                     rate (CAGR) of annual absorption by square
(EDB) and Jurong Town Corporation (JTC)
                                                     footage is 28% for the year 2008 through 2015.
teamed up to establish a Data Centre Park (DCP)
                                                     In addition, based on Structure Research, Sin-
in Jurong to attract multinational corporations
                                                     gapore colocation market size is likely to grow
to set up premium DC operations in Singapore.
                                                     from US$963.2 million in 2014 to US$1.265 billion
Till date, Telin has taken possession of a plot of
                                                     in 2016, clocking a 15% annual growth rate.
green field in the DCP, which is slated to com-

                               Pipeline Supply of DC Facilities

                                                                         U LT I M AT E
                                                                                             CO M P L E T I O N
     O P E R ATO R                 ADDRESS             REGION             I T LOA D
                                                                                                 DAT E
                                                                     C A PAC I T Y ( M W )
                                                                                                                  Artist impression of 1-Net North Data Centre (Provided by 1-Net Singapore Pte Ltd)
 Singtel                  Yung Ho road                  West                 36                 Q4 2016

 Telin                    Sunview Road                  West                  12                Q4 2016

 ST Telemedia /
                          Ayer Rajar                    West                  14                Q1 2016               Data Centre Demand on the Rise                                           Utilisation Trend
 Starhub

 ST Telemedia             Defu Ave 1                     East                 12                Q2 2016              sq ft
                                                                                                                  250,000
 DRT Loyang               Loyang Way (Brownfield)        East                13.2               Q1 2016                                                                                                              85.5%
                                                                                                                                                                                                          81.5%
                                                                                                                                                                                               77.9%
                                                                                                                  200,000
 Keppel T20               Tampines St 92                 East                 17                Q4 2016

 1-Net                    Riverside Road                North                 12                Q1 2016           150,000

 ST Electronics           Ang Mo Kio                    North               TBC                   TBC             100,000                                                                                             74.7%
                                                                                                                                                                                                          67.1%
 Global Switch            Gambas                        North               TBC                   TBC              50,000                                                                     60.0%

         TOTAL
                                                                            115.9                                       0
  (9 DC facilities)                                                                                                          2008   2009   2010   2011   2012   2013   2014   2015
                                                                                                                                                                                               UTILISATION    UTILISATION
                                                                                                                                                                                                (POWER)        (RACKS)

Source: Cushman & Wakefield Research                                                                              Source: Cushman & Wakefield Research                                 Source: Structure Research

6 | Cushman & Wakefield                                                                                                                                                                           Data Centres: The New Frontier | 7
Data Centres: The New Frontier - Cushman & Wakefield
Increased compliance
     requirements on data security
    from the finance industry, along
  with the exponential growth in data
 storage and management in a digital
econ­omy, should underpin the medium
 term growth for the market segment.

Average DC occupancy islandwide currently              Moving forward, a combination of push and pull
stands at about 70%. With a large volume of            factors will continue to drive demand for data
new supply coming online next year, occupancy          centres in the city-state. Increased compliance
could fall further, but it should not be a cause for   requirements on data security from the finance
alarm. Prices could bottom out quickly next year       industry, along with the exponential growth in
due to the sustained demand from the growing           data storage and management in a digital econ-
tech/network content companies (such as Face-          omy, should underpin the medium term growth
book, Netflix, Uber), major banks and insurance        for the market segment. As the Singapore DC
companies outsourcing the data centres to be           market matures, it is highly unlikely to see an-
compliant with MAS’ requirement on threat and          other opportunity like this following this wave
vulnerability risk assessment (TVRA). We expect        of new supply. It will therefore be wise to lock in
occupancy to be back in the 70% mark by 2018,          attractive pricing in the short term to prepare for
and it will soon turn into a landlord’s market with    the business in the next decade.
positive rental reversions once the supply is fully
taken up over the next two years.

8 | Cushman & Wakefield                                                                                      Data Centres: The New Frontier | 9
Data Centres: The New Frontier - Cushman & Wakefield
Lynus Pook                                       Christine Li

Data Centre Advisory Group                       Director, Research
Broker                                           +65 6232 0815
+65 6232 0845                                    christineli.mw@cushwake.com
Lynus.pook@cushwake.com

Copyright © 2016 Cushman & Wakefield. All rights reserved.
Data Centres: The New Frontier - Cushman & Wakefield
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