Hong Kong, Singapore to continue datacentre bull run

Hong Kong and Singapore maintained their status as datacentre hubs in Asia-Pacific (APAC) in 2017, buoyed by the growth of cloud services and the digital economy across the region.

According to 451 Research, Hong Kong’s colocation and wholesale datacentre market grew at nearly 16% despite the lack of land available for building, reaching US$744m last year. Revenues are expected to grow at a compound annual growth rate (CAGR) of 4%, hitting the $900m mark by 2021.

Analysts at the research firm said several Hong Kong datacentre providers still have room for expansion, but other important players are near or at capacity. With only two plots of land earmarked for datacentre use in the Chinese territory, they expect the industry to face challenges as it continues to grow.

“The Hong Kong datacentre market continues to see impressive growth, and in doing so has managed to stay ahead of its closest rival, Singapore, for yet another year,” said Dan Thompson, senior analyst at 451 Research.

Singapore’s datacentre market closed the year with $739m in revenue – although the Southeast Asian city-state is expected to surge ahead of Hong Kong, with a CAGR of 8%, raking in $1bn in datacentre revenues by 2021.

While the number of new builds in Singapore slowed in 2017, the market still saw nearly 12% supply growth overall, compared with 19% the previous year, 451 Research said, noting that the “reduced builds in 2017 follow two years when providers had invested heavily in building new facilities and expanding existing ones”.

Thompson said: “Rather than seeing 2017 as a down year for Singapore, we see it as a ‘filling up’ year, where providers worked to maximise their existing datacentre facilities. Meanwhile, 2018 is shaping up to be another big year, with providers including DODID, Global Switch and Iron Mountain slated to bring new datacentres online in Singapore.”

Singapore and Hong Kong have traditionally served as gateways to their economic hinterlands of Southeast Asia and China respectively, drawing datacentre providers to open facilities in the two cities to support the region’s growing digital economy.

“Cloud and content providers are choosing to service their regional audiences from Singapore because it is comparatively easy to do business there, in addition to having strong connectivity with countries throughout the region. This all bodes well for the country’s future as the digital hub for this part of APAC,” said Thompson.

Likewise, Hong Kong’s position as the gateway into and out of China remains a key reason why cloud providers are choosing the area, as well as the ease of doing business there. “This is good news for the city as long as providers find creative solutions to their lack of available land,” 451 Research noted.

Other cities in the vicinities of Hong Kong and Singapore, however, are also vying for a slice of APAC’s booming datacentre market, which is expected to grow at a CAGR of 14.7% from 2015 to 2022 to reach nearly $32bn at the end of 2022.

“Singapore sees some competition from Malaysia and Indonesia, while Hong Kong could potentially see more competition from cities in mainland China, such as Guangzhou, Shenzhen and Shanghai,” 451 Research said.

“However, the surrounding markets are not without challenges for potential consumers, suggesting that Singapore and Hong Kong will remain the primary destinations for datacentre deployments in the region for the foreseeable future,” it added.

According to a 2017 study by Tufts University and Mastercard, Singapore and Hong Kong were among countries with high levels of digital development while continuing to lead in innovation and new growth.  The two economies also led the region in an annual cloud readiness study by the Asia Cloud Computing Association.