SINGAPORE: Hong Kong’s data centre market continues to see “impressive growth” in 2017, and stays ahead of rival destination Singapore, but the latter is expected to reverse its fortunes by the end of 2019, a new study by IT analyst firm 451 Research revealed.
The report of the studies on both countries’ wholesale and colocation data centre markets, released on Wednesday (Feb 14), showed that Hong Kong experienced another solid year of growth at nearly 16 per cent and raked in HK$5.8 billion (US$744 million) last year despite the lack of available land for building new data centres.
By comparison, Singapore’s wholesale and colocation data centre revenue reached US$739 million (S$1.06 billion) last year, the report added.
That said, 451 Research predicted that Singapore’s data centre market will see a compound annual growth rate (CAGR) of 8 per cent and reach US$1 billion (S$1.42 billion) in revenue by 2021, more than Hong Kong’s CAGR of 4 per cent and revenue of US$900 million (HK$7.01 billion) during the same period.
In fact, Singapore’s revenue is expected to surpass Hong Kong’s by the end of 2019, the researchers said.
Looking deeper at the findings, the research showed that in Hong Kong, several providers still have room for expansion but other important players are near or at capacity and only two plots of land are earmarked for data centre use.
“Analysts note that the industry will face challenges as it continues to grow, hence the reduced growth rate over the next three years,” the report stated.
As for Singapore, the analysts found that while the number of new builds in Singapore slowed last year, the market still saw nearly 12 per cent supply growth overall compared with 19 per cent in 2016.
“Rather than seeing 2017 as a down year for Singapore, we see it as a ‘filling up’ year, where providers worked to maximise their existing data centre facilities,” said Mr Dan Thompson, senior analyst at 451 Research and one of the report’s authors.
Until recently, the finance industry has driven much of the take-up, and there remains more potential demand from that sector, particularly in response to local regulations. However, providers report that cloud specialists and content firms are now major drivers of demand as well, the research found.
“Meanwhile, 2018 is shaping up to be another big year, with providers including DODID, Global Switch and Iron Mountain slated to bring new data centres online in Singapore,” Mr Thompson said.
GROWTH ISN’T MUTUALLY EXCLUSIVE
The analysts also compared both markets and concluded that multinational companies need to deploy data centres in the two countries as “each serves a very specific role in the region”.
“Hong Kong is the digital gateway into and out of China, while Singapore is the digital gateway into and out of the rest of Southeast Asia,” the report said.
There is competition for Singapore and Hong Kong though, with Malaysia and Indonesia vying for business with the former and Hong Kong potentially seeing more competition from cities in from the mainland such as Guangzhou, Shenzhen and Shanghai, the analysts said.
“However, the surrounding markets are not without challenges for potential customers, suggesting that Singapore and Hong Kong will remain the primary destinations for data centre deployments in the region for the foreseeable future,” the report added.