Investment in Asia-Pacific data centers surged in 2021, with demand poised to outstrip supply for years to come, according to a report Wednesday by CBRE Group, a commercial real estate services and investment firm.
Direct investment in Asia-Pacific data centers came to $4.8 billion last year, more than double the tally for 2020 and greater than the combined totals for the prior four years, the CBRE report said.
And with CBRE’s latest survey of real estate investors’ intentions finding data centers remaining the most popular “alternative” real estate segment for a third year in a row, the report predicted that both investment activity and fundraising will remain “robust” in 2022.
Over the coming three years through 2024, meanwhile, another 2,100 megawatts of data center capacity is likely to come on line, roughly double the Asia-Pacific region’s current capacity.
With competition for data center assets intensifying, the same survey showed almost have of respondents anticipating “cap rate compression,” or lower investment returns, this year.
But relative to the U.S. and Europe, demand in the Asia-Pacific region appears set to continue outstripping supply, setting the stage for reasonably attractive returns for another five years or more, said Tom Fillmore, Singapore-based director, data center capital markets at CBRE, in an email.
“We believe we’re 5-7 years away from the market converting to somewhat of a more commoditised market, similar to the U.S. and Europe,” Mr. Fillmore said.
However, he added, “this will not happen until a sufficient amount of new product is developed across the region.”