Data Centres: The New Frontier

Data Centres: The New Frontier

Data centres are the core infrastructure on which the digital economy runs. As Singapore journeys to a Smart Nation, it will require more uses of and reliance on data centres for areas such as cloud services, data analytics and the Internet of Things. 2016 Cushman & Wakefield IDA SINGAPORE 11 MAY 2015 NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, IS MADE TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN, AND SAME IS SUBMITTED SUBJECT TO ERRORS, OMISSIONS, CHANGE OF PRICE, RENTAL OR OTHER CONDITIONS, WITHDRAWAL WITHOUT NOTICE, AND TO ANY SPECIAL LISTING CONDITIONS IMPOSED BY THE PROPERTY OWNER(S). AS APPLICABLE, WE MAKE NO REPRESENTATION AS TO THE CONDITION OF THE PROPERTY (OR PROPERTIES) IN QUESTION.

and landlords are still confident about the takeup rates and C&W believes that once the supply is fully absorbed, pricing might even start to trend up as early as the beginning of 2018. Singapore s DC scene started with three major operators: Equinix (SG1), Global Switch (Tai Seng) and Singtel (Commtech) in the late 90s. Being the first mover in this industry, they were the gateway to global network providers via international carriers. Equinix and Global Switch dominated the MNCs, while Singtel attracted most of the local enterprises and government agencies. However, majority of the servers was still housed within the office space until the late 2000s. Today, both Equinix and Global Switch have the reputation as a carrier hotel, with up to 200 telco carriers in each of their facilities. 248.5 MegaWatts APPROXIMATE IT POWER SUPPLY IN SINGAPORE S DATA CENTRES At the time of the launch of iphones came the next wave of DC providers, namely, DRT (IBP), Keppel (S25), Singtel (KC1), Equinix (SG2) and 1-Net (Chai Chee). Most of these providers have Data Centres: The New Frontier Data Centre Colocations Capacity: Regional Distribution Despite the across-the-board pessimism in the real estate industry, data centres (DCs) seem to be one unique segment that is booming with lots of optimism. Singapore currently has the largest data centre market in the Asia Pacific region (even larger than UK, which is the biggest market in Europe), owing to several attributes which make it a conducive host country for data centres. These include advantageous geographic location, safe and dynamic business environment, stable power supply, and support from the government. Singapore is also spared from natural disasters such as earthquakes and typhoons which affect many neighbouring countries. Based on C&W s data, there is approximately 248.5 MegaWatts (MW) of IT power supply collectively in Singapore s data centres. Out of which, 163 MW has been utilised, 55.1 MW has been earmarked for future expansion and 30.4 MW is currently available. In addition, there will be 115.9 MW of supply across seven DC new facilities by December 2016 islandwide (with additional two DC facilities being planned with no specific timeline). This represents a whopping 46.6% of the total current stock by MW, which presents an ideal scenario for tenants seeking better quality DCs or migrating from ageing facilities due to competitive pricing. Despite this new wave of supply of DC facilities, operators 32% WEST $310M JURONG 9% NORTH $83M SENGKANG SERANGOON 32% EAST $571M Colocation Revenue 2014 TOTAL $963M (in USD) Source: Structure Research 4 Cushman & Wakefield Data Centres: The New Frontier 5

good occupancy given their strategic locations, uptime availability and more importantly, their good reputations in the market. The more recent significant demand for DC started in early 2010s when the Singapore government took a keen interest in developing the sector further to cement Singapore s position as an infocomm technology and media hub under the Smart Nation initiatives. As a result, the Infocomm Development Authority of Singapore (IDA), Singapore Economic Development Board (EDB) and Jurong Town Corporation (JTC) teamed up to establish a Data Centre Park (DCP) in Jurong to attract multinational corporations to set up premium DC operations in Singapore. Till date, Telin has taken possession of a plot of green field in the DCP, which is slated to commence operation in December 2016. Since 2011, Singtel (KC2), Tata, NTT, Keppel (T25), Pacnet (110 PL), io (AMK), and Century Link have garnered more market share. Most recently, with the completion of Keppel (T27) and Equinix (SG3), the nationwide supply was boosted to more than 248MW. Demand for DC facilities has been robust and is likely to sustain in the medium term. According to C&W s data, the compounded annual growth rate (CAGR) of annual absorption by square footage is 28% for the year 2008 through 2015. In addition, based on Structure Research, Singapore colocation market size is likely to grow from US$963.2 million in 2014 to US$1.265 billion in 2016, clocking a 15% annual growth rate. Pipeline Supply of DC Facilities OPERATOR ADDRESS REGION ULTIMATE IT LOAD CAPACITY (MW) COMPLETION DATE Singtel Yung Ho road West 36 Q4 2016 Artist impression of 1-Net North Data Centre (Provided by 1-Net Singapore Pte Ltd) Telin Sunview Road West 12 Q4 2016 ST Telemedia / Starhub Ayer Rajar West 14 Q1 2016 Data Centre Demand on the Rise Utilisation Trend ST Telemedia Defu Ave 1 East 12 Q2 2016 DRT Loyang Loyang Way (Brownfield) East 13.2 Q1 2016 Keppel T20 Tampines St 92 East 17 Q4 2016 sq ft 250,000 200,000 77.9% 81.5% 85.5% 1-Net Riverside Road North 12 Q1 2016 150,000 ST Electronics Ang Mo Kio North TBC TBC Global Switch Gambas North TBC TBC 100,000 50,000 60.0% 67.1% 74.7% TOTAL (9 DC facilities) 115.9 0 2008 2009 2010 2011 2012 2013 2014 2015 UTILISATION (POWER) UTILISATION (RACKS) Source: Cushman & Wakefield Research Source: Cushman & Wakefield Research Source: Structure Research 6 Cushman & Wakefield Data Centres: The New Frontier 7

Increased compliance requirements on data security from the finance industry, along with the exponential growth in data storage and management in a digital econ omy, should underpin the medium term growth for the market segment. Average DC occupancy islandwide currently stands at about 70%. With a large volume of new supply coming online next year, occupancy could fall further, but it should not be a cause for alarm. Prices could bottom out quickly next year due to the sustained demand from the growing tech/network content companies (such as Facebook, Netflix, Uber), major banks and insurance companies outsourcing the data centres to be compliant with MAS requirement on threat and vulnerability risk assessment (TVRA). We expect occupancy to be back in the 70% mark by 2018, and it will soon turn into a landlord s market with positive rental reversions once the supply is fully taken up over the next two years. Moving forward, a combination of push and pull factors will continue to drive demand for data centres in the city-state. Increased compliance requirements on data security from the finance industry, along with the exponential growth in data storage and management in a digital economy, should underpin the medium term growth for the market segment. As the Singapore DC market matures, it is highly unlikely to see another opportunity like this following this wave of new supply. It will therefore be wise to lock in attractive pricing in the short term to prepare for the business in the next decade. 8 Cushman & Wakefield Data Centres: The New Frontier 9

Lynus Pook Data Centre Advisory Group Broker +65 6232 0845 Lynus.pook@cushwake.com Christine Li Director, Research +65 6232 0815 christineli.mw@cushwake.com Copyright 2016 Cushman & Wakefield. All rights reserved.