Data centers move into industrial sites

Money glitz | Staff reporter 28 Oct 2021

With the government's vigorous promotion of the development of innovation and technology and the rising demand for network connection during the pandemic, many industrial buildings in Kwai Tsing District have been turned into data centers.

The supply of land for data centers in Hong Kong is tight, but with the advent of the 5G era and the rapid development of the Internet of Things and artificial intelligence, various industries have accelerated their digital transformation, leading to strong demand for data center facilities and services.

Coupled with the policy of industrial-building revitalization, which allows a 20 percent increase in plot ratio for redevelopment projects of pre-1987 industrial buildings, consortia have been attracted to apply for reconstructions and changing them into data centers.

At least six projects in Kwai Tsing have been applied for reconstruction for similar developments, of which half are under the Chinese data center solution provider GDS (9698), involving a gross floor area of about 750,000 square feet.

Among the three projects, the one that will be completed first is Luen Fat Industrial (First) Building at No 2-16 Lam Tin Street. It has been approved for the construction of a 23-story data center with a total gross floor area of about 246,800 sq ft and is expected to be completed in 2022 at the earliest.

It is estimated to be officially open for operations in the middle of the year.

By then, it will provide data center services for financial institutions, internet and cloud service providers, international telecommunications operators and local enterprises.

The latest application among the six projects is from Soundwill (0878) for the redevelopment of a 20-story data center with a total gross floor area of about 218,000 sq ft in the South China Cold Storage Industrial Building.

The company's spokesperson said the market demand for data centers has soared, so even if there are multiple similar projects completed in the Kwai Chung District in the future, Soundwill will not be concerned about the competition.

The convenient transport facilities in the area are also beneficial to the development and the company is optimistic about the future of the area, the spokesperson added.

The popularization of big data and 5G technology is the general trend of future development in the world, a senior executive at local developer Grand Ming Group (1271) said. The overall occupancy rate of the group's two data centers in Kwai Chung and Tsuen Wan exceeded 90 percent and the company remains optimistic about the development of the data center market in the future.

The company said in its annual report that it completed the acquisition of two parcels of land in Fan Ling, New Territories, for HK$356 million in September 2020, and planned to develop two new high-tier data centers there.

Vincent Cheung Kiu-cho, the managing director of Vincorn Consulting and Appraisal, expects the demand for data center services will continue to grow as the use of cloud-based applications, big data analysis and artificial intelligence is increasing during the pandemic.

The hybrid work model - an arrangement that allows employees to work from home now and again rather than forcing them to stay in the office all the time - has been adopted by many companies, also contributing to the rising demand for cloud technology, Cheung said.

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