Japan, India, Malaysia: many new data centers in Asia thanks to AI boom
AI needs hordes of new servers and data centers. Europe is building a little, the USA a lot more, and Asia-Pacific dwarfs both.
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More and more servers are working for artificial intelligence (AI). Europe cannot keep up with the additional demand when it comes to building new data centers, and there is even less free capacity for servers in the USA, although significantly more is being built there. However, both are being overtaken by the Asia-Pacific region. While 138 megawatts of server capacity was added in the top five locations in Europe in the first half of the year and 515 MW in the top eight cities in the USA, no less than 1.3 GW was added in the Asia-Pacific region.
This figure relates to Australia, the People's Republic of China, its special territory Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam, and is based on surveys by market observers at Cushman & Wakefield. The AI boom has brought about a trend reversal in the region: In the last two years, investment in data centers has slumped, as the real estate experts at CBRE report; in 2019, just under 1.5 billion dollars were invested in new data centers in the region, in 2020 this doubled to 3 billion, and in 2021 the 4 billion mark was broken. China and Hong Kong were the drivers.
In 2022, however, the buzzer fell below the 2019 figure, and in 2023, investment in China and Hong Kong virtually stopped completely. China's real estate market has been in a deep crisis since 2021. It is only thanks to a boom in Japan that one billion dollars still flowed into new Asian data centers in 2023. CBRE expects an upturn again this year, again driven by Japan. "Activity elsewhere will be limited," write the market observers.
Asia is growing
Of course, the investments are not immediately reflected in new buildings for servers; the lead times are measured in years. The People's Republic of China (excluding Hong Kong and Macao) currently has 4.2 GW of server capacity, which is roughly equivalent to that of the top 15 locations in Europe combined. It is followed by Japan and India (1.4 GW each) and Australia (1.2 GW). The top 14 Asian markets mentioned above reached 11.6 gigawatts of capacity by the middle of the year, of which, as mentioned, 1.3 GW was added in the first half of the year alone.
Malaysia recorded the largest increase in data center capacity in the first half of the year (+80%, mainly in Johor, which borders Singapore), followed by India (+28%). India's capacities have doubled in just 18 months. If existing, under construction and planned site capacities are added together, China is expected to have 6.5 gigawatts, Japan and India 4 GW each and Australia 3.5 GW. The most important cities are Tokyo (which only exceeded the gigawatt threshold last year), Beijing, Sydney and Shanghai, each with over 2 GW, followed by Johor (1.9 GW) and Mumbai (1.8 GW). Each of these cities outshines even Europe's most important location, Frankfurt.
Meanwhile, South Korea is falling behind; due to protests by local residents and new regulations regarding power consumption, the construction of new data centers has practically come to a standstill. The background to this is that South Korea imports almost all of its energy by sea. Electricity is also in short supply in Singapore. Although it is the most expensive place for server locations, Singapore has practically no free capacity. The particularly good connection to international fiber optic lines is attractive.
Skills shortage slows down Japanese projects
This explains why data centers are springing up like mushrooms in Johor: The Malaysian state is located on the mainland opposite Singapore. For 101 years, a dam has connected Singapore with Johor's capital Johor Bahru. Not only traffic and drinking water flow over it, but also data.
What is slowing down the growth of data centers in the Asia-Pacific region, as in the USA and Europe, is the lack of sufficient power supply. However, there is also a shortage of skilled workers in Japan in particular. As reported by Cushman & Wakefield, a planned data center in Odawara was able to secure a power supply for 2025. However, due to a lack of workers, it had to postpone its opening until 2027 or possibly 2028. Although construction workers will become available once preparations for Osaka Expo 2025 are complete, this is only likely to ease the situation slightly. The good news is that not all planned capacity has already been let in advance. And for Mumbai and Hong Kong, the survey shows a vacancy rate of 19 percent for the first half of the year. If you want to set up servers there, it is much easier than in Europe or even the USA.
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