Data Centre Construction Boom Shifts Focus to Emerging Markets
The data center construction boom is increasingly centered on Southeast Asian (SEA) markets, marking a significant trend outlined in the Data Centre Cost Index 2023. Despite a global uptick of 6% in data center construction costs in the past year, SEA markets have witnessed a substantial rise of up to 22%.
Tokyo, Zurich, Silicon Valley, New Jersey, and Singapore remain the top five expensive locations, but a reshuffling shows SEA markets gaining prominence. Tokyo leads at USD$13.7 per watt, surpassing Zurich, while Jakarta and Kuala Lumpur experience notable jumps, claiming the seventh and tenth spots, respectively.
A rapid rise in construction costs characterizes the year-on-year trend in SEA markets, with seven countries experiencing significant increases ranging from 11 to 22%. Digitalization and economic development in Jakarta and Kuala Lumpur present fresh opportunities.
Riyadh in Saudi Arabia enters the index at an average construction cost of US$10 per watt, reflecting robust investment in digital connectivity and mega-projects supporting national development.
The construction cost gap between conventional hubs and SEA locations narrows, exemplified by significant price increases in Jakarta and Kuala Lumpur.
Despite high demand, SEA markets face labor shortages, with 94% reporting skills deficits. Power availability now outweighs geographical location in importance for data center construction in the region.
SEA markets respond to the increasing demand for artificial intelligence (AI), with 88% confirming a rapid rise in AI-related data center capacity demand. Consequently, the power requirement for these energy-hungry data centers is expected to grow.
The industry remains optimistic about SEA markets, with 79% identifying the sector as recession-proof. Challenges such as labor shortages and power requirements require collaborative solutions for long-term sustainability in the SEA data center construction sector.
