19 July 2016
The market for data-centre services is expanding in the Asia-Pacific region, with the industry worth more than US$14 billion in 2015, according to market research firm Frost & Sullivan. By the end of 2022, the market is expected to be worth about US$32.8 billion.
Hong Kong is Asia’s fastest-growing data centre market, and is predicted by Frost and Sullivan to expand to about US$800 million by 2019. The city is also the safest place in Asia to set up data centres, according to the Cushman & Wakefield Data Centre Risk Index, due to its strong telecommunications infrastructure, reliable and cost-effective power supply, strong reputation for data privacy and information security, knowledgeable professionals and government support.
The Hong Kong Government says it’s committed to further developing the industry. “Together with a pro-business environment, robust telecommunications infrastructure, reliable power supply, free flow of information, low and simple taxation regime, as well as the proximity and close ties with the mainland, Hong Kong possesses superior competitive advantages and is an ideal place to set up data centres,” said Victor Lam, Deputy Government Chief Information Officer (Consulting and Operations), speaking at the Cloud Expo Asia and Data Centre World Hong Kong, held in May.
In March, the Hong Kong Government extended a scheme that grants data centres preferential access to buildings aged 15 years or older. Fourteen applications, to date, have been approved, spanning about 67,000 square metres. Mr Lam said the government would streamline the approval process for converting industrial buildings into data centres to about two weeks.
Hong Kong currently has about 465,000 square metres of data centre space in three primary locations: Kwai Chung, Tsuen Wan and Tseung Kwan O.
Real estate consultancy Colliers International estimates that a further 160,000 square metres will come online before the end of 2018. “In the next two-and-a-half years, five developments catered for data centres will be completed. Two-thirds of the total new supply will be in Tseung Kwan O Industrial Estate,” says Colliers’ Senior Director of industrial services, Wayal Chiu.
He notes that two more one-hectare sites, which could yield over one million square feet in total gross floor area, will be available in the medium term.
The rapid growth is part of the government’s commitment to develop high-tier data facilities. Tier III and Tier IV data centres are the most sought after by the banking, financial services and insurance sectors because they have redundant power supplies, are temperature-controlled and guaranteed to run 99.9 per cent of the time.
Co-location and the Cloud
Government figures show data centre space is growing at about 10 per cent a year. To meet demand, cloud computing and shared – or co-located – data centres are increasingly popular.
A Collier’s report identifies co-location as flexible, reliable and cost-effective. “For occupiers with stringent requirements, such as critical systems with thin tolerance of down time, co-location is one of the best solutions,” says Arthur Yim, Colliers’ Research and Advisory Manager.
Statistics from Structure Research showed that Hong Kong’s co-location market is projected to increase 17 per cent to US$828.7 million next year, up from an estimated US$709.3 million this year.
Reflecting a shift from legacy information technology systems to more flexible cloud-based services, financial services companies are also helping spur the development of Asia’s cloud computing industry.
In the Cloud Readiness Index 2016, Hong Kong is ranked first in the Asia-Pacific region. According to the index – provided by a consortium of cloud computing providers from around the world – Hong Kong, Singapore, New Zealand and Australia are ranked above countries such as Germany, Britain and the United States, demonstrating that Asia-Pacific economies lead the world in cloud readiness.
Helping propel the development of Hong Kong’s data centre business are trade events. The inaugural Cloud Expo Europe/Asia and Data Centre World was staged in Hong Kong for the first time in May, featuring more than 100 suppliers and industry stakeholders. About 250 speakers and some 5,000 delegates took part.
“Hong Kong is a world-class technology market, leading Asia in terms of the largest cluster of Tier 1 data centres and cloud-readiness, and as such, has embraced a high-quality global event to help its development,” says Event Director Chris Brown.
Organiser CloserStill Media will stage the twin events again from 24 May 2017 at the Hong Kong Convention and Exhibition Centre, adding two more events, the Cloud Security Expo and Smart IoT Hong Kong.
Organisers say reaction to the conference from the business community was positive. “We have plenty of business on the data-centre side, so I’m exploring plenty of opportunities here, both for current projects and for future reference,” says Glen Carbone, Goldman Sachs’ Senior Engineer for global data centres.
CBRE Head of Research for Hong Kong, southern China and Taiwan, Marcos Chan, recently wrote that the infrastructure underpinning data centres is also being upgraded. Keppel T&T plans to develop a 1,000-square-metre international carrier exchange with PCCW Global before the end of this year, and Chinese mainland carriers China Mobile and China Unicom are opening data centres in Tseung Kwan O.
Other international market participants, such as Fujitsu, NTT Communications, Equinix and Telstra, are expanding their capabilities.
Late last year, Japan’s NTT launched the second phase of the Hong Kong Financial Data Centre, while last May, Telstra, Australia’s biggest communications network and a major player in the Asia-Pacific cable infrastructure space, announced three new point-to-point cables connecting the stock exchanges of Hong Kong, Singapore and Tokyo.
For banks, recent infrastructure moves and announcements are welcome news. Lower latency improves competitiveness and attractiveness to customers looking for more high-frequency trading options. Equally, access to more data centres improves banks’ ability to analyse customer behaviour by crunching big data numbers.