Demand for Data Centres?

The real estate market is seeing a steady growth in demand for data centres. There is keen interest from both local and foreign investors. Malaysia has received RM76bil worth of investments involving data centres from 2021 until March 2023. The Government wants the country to be a regional data centre hub – in ASEAN and Asia.

Knight Frank in its Data Centre Research Report for Malaysia states that the development of the country’s data centre industry has primarily taken place in two main regions, namely Greater Kuala Lumpur (comprising central Kuala Lumpur and Cyberjaya) and Johor. Knight Frank says the Asia-Pacific region’s data centre landscape is currently experiencing robust growth, fuelled by a rising demand for cloud computing, big data and eCommerce.

According to Knight Frank, within the Greater Kuala Lumpur area, Cyberjaya has emerged as the key data centre hub serving the rest of Malaysia. Additionally, Knight Frank says the Malaysia Digital Economy Corp, which manages Cyberjaya, has been collaborating with the government and utility companies to ensure adequate power supply, making it an attractive location for data centre development.

Whilst Cyberjaya remains the premier data centre location in the greater Kuala Lumpur area, Knight Frank says new locations such as Bukit Jalil and Petaling Jaya are also seeing an uptick in demand from customers and operators alike.

Industrial lands next to the Tenaga Nasional Bhd’s pylons and substations (for example, Sedenak, Johor) have become more premium. Although data centres are not labour intensive, they however open up new investment opportunities for investors.

According to Knight Frank, Johor is becoming an increasingly important location for data centres in Malaysia and a viable alternative hub for South-East Asia. Due to its close proximity to Singapore, favourable support from local authorities and availability of land and power, Johor is an attractive location for those seeking an alternative hub.

Knight Frank says that currently, the market has 33 megawatts of live and pipeline capacity, with most of the facilities under construction or in the planning stages. These facilities are primarily build-to-suits for Western and Chinese cloud providers, as well as regional tech companies.

KGV International Property Consultants (M) Sdn Bhd says there are several reasons for the popularity in demand for data centres in Johor. Singapore is very stringent on new data centres and hence, Johor is the next alternative. Johor Bahru’s proximity to Singapore is also a major factor, as it can be linked by fibre optics to Singapore. There are already some ports in Johor Bahru for that purpose.

The availability of power, water and data lines, which are imperative for smooth operations of data centres, are easy to come by in Johor Bahru. The encouragement by the government to attract data centres to the state is also another positive point.

The development of data centres in Johor is focused in three main areas, namely the Nusajaya Tech Park, Sedenak Tech Park and YTL Green Data Centre Park. It is anticipated that the data centre market in Johor will grow significantly, surpassing even the Greater KL region in terms of live capacity. Early movers into Johor include the likes of Keppel, Bridges and Yondr, who have all secured multi-megawatt hyperscale contracts from either Chinese or Western Cloud companies.

This is a good start and niche for Malaysia. We need to constantly improve the environment/landscape to have more data centres including perhaps in Penang. We could identify other industries that find it difficult to operate in Singapore, Hong Kong or Tokyo and help them relocate to Malaysia. That provides technology, investments and jobs/skills for the future.

Reference:

Dynamic market potential, Eugene Mahalingam, The Star, 19 August 2023