This article is from the Australian Property Journal archive
TRANSACTION volume for data centre assets hit a five-year high in 2020, as the sector competes against ecommerce for increasingly rare industrial land – driving up values by paying above market prices, anywhere from $1,000 – $1200 per sqm, as worldwide spending on cloud infrastructure soared during the COVID-19 pandemic to US$142 billion.
According to CBRE’s new Asia Pacific Data Trends H2 2020 report, net absorption doubled for data centres in 2020, with Tokyo, Sydney, Singapore and Hong King leading the way as Asia Pacific Tier 1 markets, hitting 321.6 megawatts.
This record breaking net absorption was necessitated by shifts in data use brought on by the COVID-19 pandemic, as much of work and life moved into the online space.
“The COVID-19 pandemic has accelerated digital transformation across areas such as e-learning, online shopping, content streaming and entertainment,” said Cameron Grier, Regional Director of CBRE Industrial & Logistics in Pacific.
Resulting use of remote working platforms, video conferencing, online schooling, entertainment and social networking required greater data storage computing and networking over the year.
Sydney, Singapore and Tokyo registered the greatest demand, larger from hyperscale cloud providers. This alone contributed approximately two-thirds of absorption.
“Business continuity planning has also prompted the rapid uptake of cloud adoption to support remote working. Looking further ahead, the wider adoption of 5G, further digitalisation of healthcare and other government services will be the primary demand drivers of data centre growth,” added Grier.
Asia Pacific Tier 1 data centre markets also recorded record breaking growth in total colocation capacity in 2020, increased by 17% year on year. The majority of these completions were located in Sydney and Singapore.
“Data centre groups have been very active in Sydney and Melbourne over the past year and are now even focusing their attentions on markets like South Australia and Western Australia,” said Grier.
“Last year alone in Western Sydney, data centre groups acquired circa 55ha (550,000sqm) of land for hyperscale/cloud sites.”
Throughout 2021, supply will increase as projects that were put off during the pandemic will be scheduled for completion.
Vacancy matched this throughout 2020, falling to just 13.9% at the end of the fourth quarter.
“Data centre demand is pushing industrial land prices up across the country, for instance the market rate for benched and serviced land in Eastern Creek and Erskine Park is paying anywhere from $1,000 – $1200 per square metre, which is above market price.”
Full year transaction volume for these assets reached US$2.2 billion in 2020, the highest recorded figure in five years, while platform formation and M&A deals for data centres saw at least US$5.0 billion spent by funding platforms and joint ventures across the region.
“Data centres continue to lure investors keen to avail of the opportunities resulting from massive demand for data storage and computation,” said Dr. Henry Chin, Global Head of Investor Thought Leadership and Head of Research, Asia Pacific, CBRE.
This rising demand was reflected in Australian data centre group NEXTDC’s record revenue results, despite a net loss after tax of $17.5 million due to operational costs.
NEXTDC is also getting started on a new data centre asset in Sydney’s lower north shore, after appointing Multiplex to deliver construction on its first stage and AirTrunk has opened one of the largest data centres in Sydney’s north (SYD2).
“The asset class also offers prospects for diversification and enhanced risk-adjusted returns. With operational risk and securing planning approvals remaining a challenge, CBRE advises investors to form partnerships with experienced data centre operators, especially second tier groups looking to expand their scale and capacity,” concluded Chin.
Data centres operators are now competing with e-commerce for valuable land in Sydney as supply is quickly running out.
The latest data from Canalys shows global spending on cloud infrastructure in 2020 amounted to US$142 billion, driven by online games and remote work.
This is an increase of 33% compared to 2019’s US$107 billion.
According to research released by Comprar Acciones, Microsoft Azure revenue topped US$59.5 billion last year overtaking Amazon and Google combined.
Amazon Web Services (AWS) came in second place with US$45.4 billion and Google Cloud came in third, overtaking Salesforce, with US$13 billion in revenue.
Excluding the top three players, market still grew at a 30% rate, highlighting opportunities even for smaller players.
