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AI boom fuels Singapore investment in data centres

Written by Fri 12 Apr 2024

Data centres are becoming a focus for investors in Asia, as interest in artificial intelligence (AI) applications has revealed the importance of infrastructure to support advancing technology. This has caused what some see as a race to take advantage of the opportunity to build, manage, and acquire data centres.

A study by CBRE found data centres are the preferred alternative asset for REITs in Asia-Pacific, with the share of investors rising from 29% in Q1 2023 to 33% in Q1 2024.

Nikkei Asia reported this investment trend is exemplified by the activity of Singaporean REITS in the data centre industry. A moratorium on data centre construction on the island has limited investment opportunities inside the country, driving international activity.

In March, Keppel announced the purchase of a partially constructed Tokyo data centre from Mitsui Fudosan.  Keppel noted the purchase was driven in part by research showing strong growth in the Japanese public cloud market, which is expected to hit £27.2 billion ($34 billion) by 2028.

Less than a year ago, MapleTree Industrial Trust purchased a data centre facility in Osaka for £302.6 million ($378 million).

“The proposed acquisition offers a strategic opportunity to diversify our data centre presence in Japan, one of the most developed data centre markets in the Asia Pacific. It will enlarge our presence in the resilient data centre sector, which continues to offer attractive growth prospects,” said Tham Kuo Wei, CEO at MapleTree Industrial Trust.

This purchase marked MapleTree’s strategic entry into the Japanese market, citing AI adoption and e-commerce as two drivers of growing demand for data centre services.

The Head of Asia-Pacific at CenterSquare Investment Management, Joachim Kehr, echoed this sentiment.

“In 2022, data centres still only accounted for 1.4% of Asia’s REIT universe, with two dedicated Singapore DC REITs accounting for that,” said Kehr.

Kehr added that data centres are a key area of focus for Asian real estate investors and constitute a growing part of the Asian REIT landscape.

“Whilst no new DC REITs were listed in 2022, in part a function of a poor equity market environment, a number of existing REITs are now expanding their DC exposure,” said Kehr.

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Written by Fri 12 Apr 2024

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