The pandemic ushered in digital transformations that were expected to take years, underscoring the need for more data centers.

To meet rising demand, some of the world’s biggest tech firms and other data center providers are turning to Asia, where data centers can support rising internet usage globally, as well as increase download speeds for a rapidly expanding number of users in the region. 

The market for hosting, storage and cloud computing in Asia Pacific is expected to grow by more than 150 percent by the end of 2021 when compared to 2019 levels.

“Overall, the market in Asia Pacific is incredibly hot,” says Ralph Davidson, Executive Director, Head of Regional Industries, APAC, JLL. “A tech company engaged our site selection services on Tuesday and by Friday we were scoping out eight different sites around the region.”

For example, three U.S.-based tech giants were recently granted conditional approval to build and manage hyperscale data centers (HDCs) and cloud services in Malaysia. China, India and Indonesia are likely to lead the regional growth story, according to JLL research.

HDCs are of particular interest. They’re the giants of the data center world, either owned or leased by a single company, large in size, or both. More than 100 were built in 2020, taking the total global number to almost 600, according to a report from Synergy Research Group. Capital expenditure on data centers by the world’s 20 largest tech companies from January 2020 to September 2020 totaled US$99 billion, a 16 percent increase from the same period in 2019.

U.S. data center providers are responsible for 40 percent of the world’s HDCs. And many are choosing to build their own HDCs in Asia Pacific, while others co-locate in speculative developments. The U.S.-based data center developer Equinix Inc. announced in April a joint venture to build data centers in Japan, to be occupied by tech companies or other cloud providers.

The biggest hurdles these companies often face when expanding into Asia is adjusting to design differences, says Brian Kortendick, Global Product Manager, Critical Environments and Data Centers, JLL. 

There is a lack of land in premier data center markets like Singapore. Companies have to build up, instead of out.

“The primary standards are still coming out of America, where you have these sprawling, horizontal buildings across the plains of Texas, which is similar to the western approach in Europe,” Kortendick says. “Companies expanding into Asia Pacific often need to be advised on how to build vertically and adjust to local regulations.” 

A top consideration for companies expanding into the region is power sources, which differ in reliability from region to region. This focus, as well as speed to market, is different than it is in the U.S., “where it is all about inexpensive power and total cost of ownership,” Kortendick says.

Because demand is high and financing is low interest, companies prioritize looking more for stable power in a stable location over cheap power, Davidson says. This is part of the reason why Japan is becoming a data center hotspot. 

“Japan is one of the most expensive markets but it’s a key data center market from the fact it’s a stable country with good connectivity in a good geographical location,” he says.