Asia Pacific Data Centre Investment Landscape

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ASIA PACIFIC DATA CENTRE INVESTMENT LANDSCAPE

Final Thoughts on the Landscape

some of the inputs necessary to studying the investment landscape—and certainly as it relates to arriving at a yield on cost analysis, which this report does. We are familiar with operating in developed markets in Asia Pacific where the land represents a majority proportion of the value. This would be true in markets like Tokyo, Singapore and Hong Kong. From an office perspective, at peak, the land value attributed to some of these downtown locations was 90%+. But we track some expensive data centre districts relative to the broader market in which they sit—examples include Gangnam, Seoul and Central Hyderabad—and it has taken us by relative surprise that a sensitivity analysis of land value has limited bearing on the prevailing yield on cost rates. (Although to caveat, we still need to build in additional factors around financing.) With data centres, the capital intensity is unlike most of what we have ever seen across the real estate landscape in the past, involving outsized delivery costs. Putting it all together To complete our look at the prevailing and future investment landscape we have intensely debated rents, rental growth, occupancy, efficiencies (NPI rates), and also cap rates. In my remarks accompanying the 2025 Asia Pacific Data Centre Construction Cost Guide, I spoke to the improvement we have begun to see in transaction activity at the asset level in Japan, Korea and Singapore. To that, we can add some additional evidence and transactions in Australia, although there is still a bit of artistry involved rather than embedding the out-puts entirely in science (evidence based). The inflationary period with corresponding elevated interest rates that we have been through (which of course is now in reverse in some markets), challenges how to differentiate entry cap rates with those on exit in ‘x’ years hence. In this report, we have modelled on a five-year basis. This five year time horizon was driven more by our visibility over the supply side during that period (i.e., what’s under construction and planned, as opposed to early stage) and our ability to map rents against that. We are of the opinion that most investments made by the capital today probably have five years as the minimum hold, noting the time duration of many of these projects, with seven years or even longer a more likely timeline for the infrastructure funds, (some) operators, and the core capital active including the growing REIT participation.

Rangu Salgame Chairman & CEO, Princeton Digital Group

Gordon Marsden Head of Capital Markets, Asia Pacific

AI and cloud computing are fundamentally transforming the digital infrastructure landscape. The scale and complexity of today’s data centres have grown exponentially, resulting in capital requirements that have increased multifold. Funding projects of this magnitude demands not only a very strong balance sheet but also access to deep pools of capital to ensure long-term success. At the same time, as projects become larger and more complex, delivery timelines are getting shorter. This makes efficient supply chain management and access to top engineering talent absolutely essential for delivering projects quickly and to the highest standards. Companies that excel in both areas will be best positioned to lead the current and next wave of data centre development. In the Asia Pacific region, we see Mumbai, Johor, Tokyo, and Melbourne emerging as the top AI markets, each attracting significant investment as data centres continue to be the most investible asset class.

It’s subject to debate, but let’s broadly call it five years in. Five years since the explosion of Asia Pacific activity in the data centre arena. Five years from it being a sideline topic at conferences to taking more of a centre stage; five years from AirTrunk not having a live presence in Singapore, to life after that notable M&A transaction; five years from Cushman & Wakefield’s first pan regional data centre report to this latest intelligence piece delving deeper and deeper into the drivers of the sector. In this time, most owners have now pored over their respective land banks and looked extensively at existing building portfolios for conversion or redevelopment potential. Yes, new locations will emerge as the infrastructure and regulatory environment to support data centre development continues to evolve, but by and large, the number of groups sat on land parcels purchased at historically low costs is diminishing. Now, and for the next five years (and beyond), the capital commitment for land alone takes on an impressive scale. We explore that here in this report. The Data Centre Difference For the last two years, Cushman & Wakefield has produced the Asia Pacific Data Centre Construction Cost Guide. The experience of that report informs

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