Asia Pacific data centre market sees record growth in 2024

The Asia Pacific data centre market is undergoing rapid expansion, with 1,622 megawatts (MW) of new capacity coming online in 2024, bringing the total operational IT load to 12.2 gigawatts (GW), according to Cushman & Wakefield’s latest H2 2024 Asia Pacific Data Centre Update, published on 18 February 2024. This figure is equivalent to approximately 10.5% of Japan’s average continuous power demand and more than double that of Singapore, highlighting the immense energy consumption of the data centre industry in the region. This surge is driven by increased cloud adoption, artificial intelligence (AI) infrastructure development, and growing digital content consumption.

Explosive growth and investment activity

The report highlights a robust development pipeline of 14.4GW, with 3.1GW under construction and 11.2GW in the planning phase. Key growth drivers include the rollout of 5G, the shutdown of legacy telecom networks, and the proliferation of the Internet of Things (IoT).

Private equity firms have also ramped up their investments in the sector. One of the largest deals in 2024 was the USD 16 billion acquisition of AirTrunk by a Blackstone-led consortium, which included the Canada Pension Plan Investment Board (CPP Investments). This transaction underscores the growing appetite for large-scale data centre assets.

Regional hotspots: Tokyo, Singapore, and Sydney

The report identifies Tokyo (1.1GW) and Singapore (1.0GW) as the region’s largest operational data centre markets outside of Mainland China. Singapore’s data centres accounted for approximately 7% of the nation’s total electricity consumption in 2020, a figure projected to rise to 12% by 2030. Due to concerns over the industry’s rising energy demands and environmental impact, the Singaporean government imposed a moratorium on new data centre developments in 2019. The freeze allowed authorities to evaluate more sustainable strategies for sector growth.

In January 2022, the moratorium was lifted with a new pilot scheme that permits limited data centre developments under stringent energy efficiency and sustainability requirements. As part of this initiative, Singapore aims to add at least 300 megawatts (MW) of data centre capacity in the near term, with potential for additional capacity contingent on the use of green energy sources. Sydney, currently at 768MW, is expected to surpass the 1GW milestone within the next three years. Together, these three cities account for nearly a quarter of Asia Pacific’s operational capacity.

Malaysia’s Johor market remains the fastest-growing data centre hub, more than doubling its operational capacity in 2024. With 226MW under construction and an 822MW pipeline, Johor is poised to become a major player in the region, largely benefiting from its proximity to Singapore and its role in the Johor-Singapore Special Economic Zone (SEZ).

Sustainability and renewable energy commitments

As the demand for data centres grows, sustainability has become a key priority across Asia Pacific. Governments in China, Singapore, Hong Kong, Japan, and South Korea are introducing stricter power usage effectiveness (PUE) thresholds to improve efficiency and reduce carbon footprints.

PUE is a widely used metric that measures a data centre’s energy efficiency by comparing total facility energy consumption to the energy used by IT equipment. A PUE of 1.0 indicates optimal efficiency, with no excess energy wasted on cooling or auxiliary systems. To curb excessive energy use, China has mandated that new data centres achieve a PUE of 1.3 or lower, while Singapore and Japan have set sub-1.3 targets for next-generation facilities. South Korea and Hong Kong offer incentives for operators achieving PUE levels below 1.2, encouraging the industry to adopt greener, more efficient designs.

However, improving PUE alone is not sufficient to reduce overall carbon emissions. To further sustainability efforts, many governments are requiring data centre operators to transition towards renewable energy sources. Power purchase agreements (PPAs) have emerged as a preferred strategy for securing long-term access to wind and solar energy. Major players such as Amazon Web Services (AWS), Google, and SUNeVision have signed significant PPAs in 2024 to reduce their reliance on fossil fuels.

Japan is leading the charge in clean energy adoption with its Seventh Strategic Energy Plan, which aims for 40-50% of the national power mix to come from renewable sources by 2040. The plan includes a phased reduction of thermal power, pushing data centre operators to invest in solar, wind, and nuclear energy solutions. As a result, Japan is becoming a regional model for integrating sustainability into digital infrastructure, setting a precedent for other markets in Asia Pacific.

Other countries in the region are also making significant strides towards cleaner energy solutions for data centres. China has committed to achieving carbon neutrality by 2060, and major cities such as Beijing and Shanghai are enforcing stricter green energy adoption policies for data centres. South Korea is incentivising data centre operators to transition to renewable energy sources through tax benefits and subsidies, with a strong push towards hydrogen and offshore wind energy. Singapore, following its moratorium on new data centres, has introduced a Green Data Centre Roadmap that emphasises high energy efficiency standards and renewable energy procurement. Meanwhile, India is emerging as a major player in sustainable digital infrastructure, with data centre operators increasingly investing in solar and wind power projects to align with the country’s 2070 net-zero target.

AI reshaping data centre demand

While Asia Pacific has yet to see the AI-driven data centre boom witnessed in the United States, markets such as Tokyo, Seoul, and Mumbai are gearing up for large-scale AI adoption. In Tokyo, Sakura Internet announced plans to acquire more than 10,000 GPUs annually to meet surging AI computing demands, while Microsoft committed USD2.9 billion toward cloud and AI expansion in Japan.

Similarly, South Korea has unveiled a USD48.9 billion AI investment strategy, aiming to position the country among the top three AI powerhouses globally by 2030. The Presidential Committee on AI (PCAI) has been established to spearhead national AI initiatives and drive private sector collaboration.

Rising construction costs and return on investment

The Asia Pacific data centre industry is experiencing rising construction costs, influenced by global inflation, supply chain disruptions, and increasing material expenses. According to Cushman & Wakefield’s latest Construction Cost Guide, data centre construction costs have surged across key markets, with Tokyo, Sydney, and Singapore ranking among the most expensive locations.

• Labour shortages: The growing demand for skilled labour in electrical, mechanical, and engineering roles is driving up wages, delaying project timelines, and inflating overall development costs.
• Supply chain pressures: Delays in procuring critical components, such as cooling systems, backup power units, and semiconductor chips, are extending construction cycles and increasing capital expenditures.
• Rising land prices: As urban space becomes more limited, data centre operators are being forced to seek alternative locations in suburban and secondary markets, further increasing logistical and operational costs.

Future outlook: Expansion and investment trends

The Asia Pacific data centre market is poised for continued expansion, driven by increasing demand for digital infrastructure, AI-driven computing, and cloud services. Southeast Asia, in particular, is emerging as a key growth region, with Indonesia, Malaysia, and Thailand solidifying their positions as strategic data centre hubs due to favourable government policies and expanding digital economies.