APAC data centre capacity to double by 2028: Moody’s

Investment is expected to total $564b over the next four years.

The data center capacity of the Asia Pacific (APAC) region is expected to more than double by 2028, with geopolitical tensions dispersing growth across the region.

In a report, Moody’s Ratings forecasted that APAC data center capacity to grow at a compound annual average rate of almost 20% through 2028, involving an investment of about $564b.

Geopolitical risks tied to China– which is the biggest data center market in APAC– will likely drive additional capacity to other economies in the region. 

Regulatory enhancements arising from APAC governments’ concerns over data sovereignty have also spurred providers to house data within different facilities in certain countries. 

Growth hurdles include green transition-related risks and water intensity.

“For new entrants into the market, investment in data centers will introduce a fresh layer of exposure to carbon transition risks, because their massive power needs will be primarily served by nonrenewable sources initially,” Moody’s Ratings warned. 

“Data centers' water intensity and their exposure to cyber risks could also create obstacles to their development in some APAC economies,” the ratings agency added.

Energy as a whole presents a problem especially as data centres grow rapidly.

“Energy networks may need to upgrade their capacity to accommodate data centers' large energy consumption,” Moody’s said.

“Still, regulated networks should be able to include such spending in their regulatory asset bases, which will generate highly predictable revenue and preserve their credit strength,” the ratings agency added.

Amongst sectors, telcos and real estate companies are expected to benefit most from the growth of APAC’s data centre market.

“Investment in data centers gives telcos an opportunity to diversify their revenue streams, as income declines in the legacy mobile businesses; they can also cross-sell data center services to their enterprise customers,” Moody’s said.

Meanwhile, real estate companies are investing in data centers to diversify assets and revenue sources, it said.