Demand for Data Centres Likely To Pick up in Medium-Term in Hong Kong

Despite Hong Kong’s post-pandemic recovery and expansionary requirements from mainland Chinese cloud providers and enterprises, the demand for data centres in the city has softened, yet, it is likely to pick up in the medium-term as Chinese and foreign companies return, according to CBRE’s latest report on Global Data Centre Trends 2023.

The report, looking into data centre growth among major markets across Asia Pacific, North America, Europe, and Latin America, unveils that a worldwide shortage of available power supply is inhibiting the growth, even amid the robust demand driven by new technologies. The power supply constraints could limit or delay development in markets like Tokyo, Singapore, and Hong Kong.

Based on a 250-500 kilowatt (kW) per month requirement without electricity cost, the current global supply shortage has led to a significant increase in data centre capacity prices. As a result, Singapore is now one of the most expensive markets worldwide, with prices exceeding USD$300 per month, whereas Tokyo prices have remained relatively stable at around USD$200 per month.

“Hong Kong is regarded as one of the Tier 1 data centre markets in the region thanks to the comprehensive network infrastructure and the positioning of being the mature economic hub next to mainland China amid the challenge with power supply. The leasing momentum of data centres has been strong over the past few years as catalyzed by the pandemic. This has kept vacancy low and pushed up rents,” said Samuel Lai, Executive Director, Head of Advisory & Transaction Services – Industrial & Logistics, CBRE Hong Kong.

Vacancy rates have declined as strong demand outstrips supply growth. Low supply, construction delays and power challenges are impacting all markets, and large occupiers are finding it difficult to find enough data centre capacity. For example, vacancy in Hong Kong has reduced by 1.5% to 2% year-over-year. The pipeline in Hong Kong continues to be driven by the redevelopment or renovation of older industrial buildings with the government’s potential plan to introduce new land supply in the medium-term for data centre development. 

“We are seeing continuous interest, particularly from mainland Chinese operators. With more pipelines coming up and pricing softened, data centre occupiers and investors should tap the opportunities and negotiate to obtain favorable terms. Demand is likely to pick up in the medium-term as Chinese and foreign companies return,” added Samuel. 

The growth of artificial intelligence (AI) has contributed to steady leasing activity, despite higher interest rates and economic uncertainty, and is expected to drive future data centre demand. In addition, emerging technologies such as streaming, gaming, and self-driving cars are expected to further increase the demand for high-performing data centres.

CBRE’s 2023 Global Data Centre Trends report analyzes key variables, such as total inventory, vacancy rates, net absorption, pricing and rental rates, and availability, in established and emerging markets across Asia Pacific, North America, Europe, and Latin America. 

To read the full report, click here.