Malaysia leads Asia Pacific in data centre growth, set for fastest consolidation by 2030

New Straits Times

a day ago

KUALA LUMPUR: Malaysia is set to become the fastest data centre consolidation market in Asia Pacific by 2030, driven by a robust development pipeline and surging digital demand, according to Cushman & Wakefield's Asia Pacific Data Centre Investment Landscape report.
The firm attributed Malaysia's rapid rise to land availability, improving power and connectivity infrastructure, and consistent support for digital economy initiatives. These factors have made Malaysia a preferred destination for international data centre players and hyperscalers seeking scalable, cost-efficient hubs in Southeast Asia.
The data centre consolidation market involves reducing the number of physical data centres or IT assets by combining, centralising, or migrating them to more efficient environments.
The report highlighted a significant milestone in Malaysia's infrastructure readiness: its population-per-megawatt (MW) ratio, a key benchmark of data centre capacity, is expected to decline sharply from over 60,000 people per MW currently to around 14,000 by 2030. This 80 per cent improvement is the steepest among all regional markets, signalling Malaysia's aggressive efforts to build out capacity in line with the growing demand from AI, cloud computing, e-commerce, and digital transformation.
Once viewed as a secondary option to Singapore, Malaysia has now carved out its own identity as a regional data centre powerhouse. Kuala Lumpur is becoming a key node for domestic demand, while Johor, thanks to its strategic location near Singapore, is being positioned as a prime base for hyperscale and AI-focused infrastructure developments. Other markets expected to follow in consolidation pace include Thailand and Japan.
According to Pritesh Swamy, head of insights and analysis for Asia Pacific data centres at Cushman & Wakefield, most markets in the region are still significantly underserved, averaging over 350,000 people per MW, far higher than the US benchmark of around 30,000.
"This ratio underscores the ongoing efforts in many markets to scale up infrastructure to meet the demands of economic and demographic expansion."
The report highlighted a range of factors driving investment appeal, including strong demand fundamentals, resilient yields, inflation-hedging qualities, competitive cap rates, and growing recognition of data centres as essential infrastructure.
Data centres are increasingly viewed as one of the most attractive asset classes, with growth expected to continue strongly over the next three to five years.
Swamy added that economies with a gross domestic product above US$1 trillion are expected to remain dominant growth hubs over the next 3 to 5 years.
However, transparency remains a challenge across Asia Pacific, with limited data on key financial indicators such as yield on cost and capitalisation rates, which complicates investor and lender decision-making.
The report noted that Asia Pacific's data centre development pipeline stands at about 13 gigawatts (GW), expected to become operational by 2030. The required capital expenditure for this buildout is estimated at US$156 billion, underscoring the region's growth potential and relative cost efficiency.
By 2023, the region's five largest data centre markets, Japan, China, Australia, India, and Malaysia, are projected to contribute 72 per cent of total annual colocation rental income in Asia Pacific. Each of the top five markets is projected to generate more than US$4 billion in annual colocation revenue, with the group contributing a combined US$32 billion by 2030.
In terms of asset valuation, data centre assets across 14 Asia Pacific markets are forecast to reach US$600 billion in value by 2030, surpassing the US market's projected valuation of nearly US$460 billion.
The five most expensive markets for data centre development in the Asia Pacific region are the advanced economies of Japan, Singapore, Australia, South Korea and Hong Kong/China. These markets collectively report an average development cost of about US$12.9 million per MW. Across the broader Asia Pacific region, the average development cost as of 2024 stands at US$10.1 million per MW, about 17 per cent lower than the US.
Swamy said that the surge in Asia Pacific activity over the past five years has prompted most players to re-evaluate their land banks and existing properties for redevelopment opportunities.
JLL Malaysia director of data centre transactions Kent Seet Tiong Hon said recently that Malaysia remains an attractive destination for data centre-related investments in the region, despite geopolitical risks.
He said this puts the country in a favourable position compared to many of its global peers, which are facing similar pressures amid tightening regulations and rising costs.
As of the first quarter of 2025 (1Q25), the country has completed an estimated 522 megawatts (MW) of capacity, with 1,250 MW under construction and over 3,750 MW in the pipeline.
Seet pointed out that Malaysia's completed capacity of 522 MW places it ahead of key Southeast Asian peers such as Indonesia (270 MW) and Thailand (140 MW), although it remains behind Singapore, which has 1,000 MW.