Asia Pacific Data Centre Investment Landscape

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ASIA PACIFIC DATA CENTRE INVESTMENT LANDSCAPE

Introduction to the report

Key Takeaways:

The Asia Pacific data centre market has rapidly evolved into one of the most dynamic and strategically significant asset classes in the global real estate investment landscape. Driven by the exponential growth of cloud computing, artificial intelligence (AI), and digital transformation across industries, demand for scalable, high performance data infrastructure continues to surge. This momentum is reshaping investor sentiment, positioning data centres not merely as operational infrastructure but as core investment-grade assets offering resilient income streams and long term value creation. This report provides a comprehensive assessment of the Asia Pacific data centre investment landscape, with a focus on fourteen key markets. It evaluates critical financial indicators such as capitalisation rates (cap rates), yield on cost (YoC), development costs, and total return profiles, offering insights into both stabilised assets and development opportunities. Amid tightening power availability, rising construction costs, and a growing shortage of AI-ready facilities, investors are recalibrating their strategies to capture value in a market characterised by both structural tailwinds and operational complexity. With institutional capital increasingly targeting the sector for its yield stability and inflation-hedging characteristics, understanding the nuanced interplay between market fundamentals and financial performance metrics is essential for informed decision-making. The geopolitical tensions and trade policy shifts—particularly involving the U.S. and China—pose risks to supply chains and investor confidence. Nevertheless, the structural demand for data, AI processing, and cloud services remains robust, positioning data centres as a resilient asset class amid macroeconomic uncertainty.

Data centres have emerged as one of the most attractive asset classes for investment, driven by robust demand fundamentals, resilient yields, inflation-hedging characteristics, competitive cap rates, and the increasing acceptance of the asset class as ‘critical infrastructure’. Most indicators point to sustained growth over at least the next 3 to 5 years. Key insights include: • Underserved markets across Asia Pacific: Most Asia Pacific markets remain significantly underserved, with an average of over 350,000 people per megawatt (MW) of data centre capacity. This ratio underscores the ongoing efforts in many markets to scale up infrastructure to meet the demands of economic and demographic expansion. • Economic scale as a key enabler: The development of data centres is closely tied to a market’s economic maturity and its ability to serve regional demand. While factors such as cloud adoption, IoT, and AI are direct demand drivers, economic and population growth also play a pivotal role. Economies with a GDP exceeding US$1 trillion are expected to remain primary growth hubs over the next 3 to 5 years. • Cost of construction not a primary driver: Lower construction costs are not necessarily a magnet for data centre development. Japan, despite being the most expensive market in the region, accounts for 20% of the Asia Pacific development pipeline 30% of the total CapEx required to build it out—more than any other market. The region requires an estimated US$156 billion in CapEx to deliver the capacity currently in the pipeline. • Early-stage markets command premium rents: Emerging markets such as Vietnam, New Zealand, and the Philippines exhibit higher colocation rents due to limited supply and a nascent operator landscape. These rents are expected to normalise as the markets mature and competition increases. • Attractive yield potential across the region: All Asia Pacific markets have the potential to deliver unlevered yield on cost greater than 10%. However, achieving optimal occupancy and returns depends heavily on factors such as location, build quality, and operational efficiency of respective facilities. • Strong U.S. investment presence: U.S.-based operators and investors account for 23% of built capacity and 29% of the development pipeline in Asia Pacific. U.S.-based hyperscale cloud service providers (CSPs) continue to deploy substantial capital through both self-build initiatives and colocation strategies, significantly accelerating regional data centre growth.

Author Pritesh Swamy

Head of Research & Insights, Data Centre Group, Asia Pacific

Key financial indicators such as yield on cost and capitalisation rates for data centres have remained largely opaque across most markets in Asia Pacific primarily due to a lack of comparable transactions and limited available data. With this report we aim to bridge these information gaps by offering valuable insights and forecasts to investors, lenders, and other key industry stakeholders.

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