A surge in demand for data amid the Covid-19 pandemic has seen rents for data centers rise by 5 to 10 percent.
Early last month, CMCC won a bid for an industrial site in Fo Tan for 50 percent higher than the upper limit of its market valuation. The site is slated for use as a data center by a subsidiary of CMCC Infrastructure.
Although many market watchers were of the belief that the transaction price was too high, Daniel Wong Hon-shing, chief executive of property agency Midland IC&I, said it was reasonable, as demand for this type of property has grown during the pandemic and the rise of 5G.
For example, Grand Ming also bought a site in Fan Ling for more than HK$300 million last month to build a data center.
A growing number of telecom companies are seeking buildings to use as data centers to prepare for rising demand in internet services and data streams due to 5G, as well as cloud services and online conferencing for the stay-at-home economy, Wong added.
CBRE said the gross floor area of data centers have increased four million square feet over the past two years. In the past 12 months, rents for data centers had increased while almost all office rents were falling. Per-sq-ft rents were HK$20 to HK$35 last month, up 5 to 10 percent over a year earlier.
The senior director of advisory & transaction services - industrial & logistics services, Hong Kong at CBRE, Samuel Lai, said lifestyles have changed as a result of the pandemic, leading to increased demand for data centers as more people stay at home and rely on the internet. He added that rents currently depend on whether the data center is in a newly constructed center or a refitted industrial building.
The main source of buildings for data centers has come from the reconstructed factories or refitted industrial buildings, as well as government land.
Of late, there have been fewer industrial buildings that are suitable for refitting as data centers, with sites now expected to see rental growth of 10 percent year on year at most.
Lease periods for data centers are usually longer, while they tend to see rental growth of 3 to 4 percent year on year.
According to Colliers International, data center rents will continue to rise by 4 percent this year, while yields will range from 3.5 to 4 percent, which is more attractive compared to other sectors.
Separately, a CBRE survey conducted this year found that 30 percent of respondents in the Asia Pacific will consider buying a data center, compared to 18 percent in 2019.
CBRE said strict regulation systems and operation requirements are necessary for a data center, and as such, it is hard to invest in a data center directly. Because of this, buying equity is the preferred method of investment. As a result, some investors have chosen to partner up with experienced operators.
CBRE pointed out that global mobile data usage has grown, with Hong Kong's IT total capacity growing from 299.9 megawatts in the first quarter of 2019 to 379.6 megawatts in the same period this year, an increase of 27 percent.
In the coming years, the Hong Kong market is expected to see an influx of more than 215 megawatts in capacity, it said.
staff.reporter@singtaonewscorp.com
