From the desk of James Murphy, Managing Director for APAC at DC Byte
Data centres have become one of the most attractive asset targets within the commercial real estate realm. Unlike typical commercial real estate classes, it is important to acknowledge the unique nature of the data centre sector and the need for proper understanding when choosing locations to invest in, especially those in emerging markets. Misconceptions persist regarding the positioning of data centre products and portfolios, particularly in emerging markets.
When it comes to emerging data centre markets, it is important to recognise their unique dynamics compared to more established markets in APAC. Established markets, such as Singapore and Tokyo, often boast established infrastructure and high demand. In contrast, emerging markets offer untapped opportunities as these markets are in the infancy stages of cloud adoption, and where data localisation requirements are growing. Furthermore, with today’s accelerated development of artificial intelligence (AI) and the capacity demands of such AI workloads, emerging markets pose the potential upside of hosting regional AI workloads to service the wider APAC region.
Making informed decisions about data centre locations in these emerging markets is essential for maximising growth and capitalising on the opportunities they offer. There are a multitude of factors to consider, and getting reliable market information on data centres remains key. Below are some of the pivotal factors for potential investors to first consider when planning to invest and build data centres in emerging markets.
Infrastructure and Environmental Factors
Power infrastructure is likely the most critical aspect of locating a data centre in any emerging market. Assessing the availability and reliability of power sources in these regions is crucial, as they may face challenges related to infrastructure development and stability. Understanding the local power grid, evaluating the capacity and redundancy of power sources, and verifying the reliability of the energy supply are key factors to consider. Investors must consider the varying levels of investment into existing power distribution infrastructure in these emerging markets, as adequate power infrastructure is required for the high-energy requirements of data centres to operate optimally. The existing power infrastructure and environments supporting each of these emerging markets differ widely, and hence due diligence is essential.
Network connectivity is another vital consideration in emerging data centre markets, as connectivity infrastructure may still be in the early stages of development. Determining the availability and quality of network options is paramount to ensure seamless data transfers and low latency. Evaluate the presence of multiple network service providers and their network coverage in the region. Consider the extent of fibre optic connectivity, as well as the presence of internet exchange points (IXPs) and content delivery networks (CDNs) to enhance network performance. A robust and reliable network infrastructure is essential for serving the growing demands of data-intensive applications and supporting the digital economy in emerging markets. Network availability varies massively across these emerging markets; our observations have highlighted that network and fibre assets tend to be majority-owned by groups such as legacy telecommunications providers or state-affiliated entities. With available network infrastructure owned by a limited number of entities, this brings considerations of carrier neutrality to the forefront.
Geographical and environmental factors may also influence the location choice for data centres in emerging markets. Weigh a region’s susceptibility to natural disasters such as earthquakes, floods, or hurricanes. Evaluate the local climate and the availability of resources for cooling systems. To protect the data centre infrastructure and ensure business continuity, it is important to understand geographical risks and implement appropriate mitigation strategies.
Opportunities for Growth: Scalability and Adaptability
Scalability and adaptability are other key considerations when locating in emerging data centre markets. Assess the region’s growth potential and evaluate the availability of additional land or facility space to accommodate future expansion. Consider the flexibility of local regulations and the ease of obtaining necessary permits for scaling up the data centre operations. Choosing a location that supports future growth and can adapt to evolving market demands is of utmost importance for long-term success. Certain geographies have more supports in place to facilitate data centre development, while regulations in other emerging markets is more ambiguous, posing challenges when evaluating the local landscape.
Finally, the presence of a skilled technical workforce and a supportive ecosystem is worth deep consideration. Assess the availability of trained IT professionals, network engineers, and data centre technicians in the region. Consider the presence of local vendors, system integrators, and managed service providers who can offer specialised expertise and support for data centre operations. A strong technical ecosystem will ensure efficient maintenance, troubleshooting, and support for the data centre infrastructure, wherever it is located. In many markets, the data centre talent pool is relatively shallow, and may need to be supplemented by international expertise.
Informed Decision Making on Emerging Data Centre Markets
Selecting the optimal data centre location in an emerging market requires a comprehensive evaluation of technical criteria. Assessing power infrastructure, network connectivity, geographical and environmental factors, scalability options, and a host of other factors is imperative. Beyond these, investors should also consider the competitive landscape of the markets, including where existing data centres are located within the market.
By making informed decisions in these areas, businesses can position themselves to capitalise on the opportunities and growth potential of emerging data centre markets, while ensuring the reliability and performance of their data centre operations.
At DC Byte, we help our clients get informed on data centre markets globally and empower their decision making. Interested in learning more about us and how you might benefit from our global intelligence? Get in touch with us here today.