Data centre rents in S’pore set to keep rising amid high demand, limited supply

SINGAPORE – The amount firms pay for data centre space is expected to keep rising in Singapore due to strong demand and limited availability, according to a report by real estate consultancy Colliers.

It said data centre rent will rise at an average of around 3 per cent annually, with retail co-location leases expected to increase the most due to limited supply and rising energy costs.

A co-location data centre is a facility that has been sub-leased by multiple IT tenants.

In Singapore, retail co-location leases have energy requirements below 500 kilowatts (KW).

Colliers said that co-location data centres provide around 6.5 per cent return as compared to prime retail assets such as shopping malls and retail shops, where the return is around 4.5 per cent.

The rise in rent is due to demand from network and IT services, followed closely by the growth of hyperscalers, which are large companies like Google, Amazon and Meta.

The ongoing shift to hybrid working and business digitalisation has also contributed to the demand for data centre space.

Demand is expected to remain high with the rapid growth of crypto-trading and blockchain activities, online gaming and the Metaverse.

In its June 28 report, Colliers said that Singapore is the second largest data centre hub in Asia-Pacific after Tokyo.

According to the Ministry for Trade and Industry, there are more than 70 operational data centres in Singapore with a total available IT capacity of about 1,000 MW as of last year.

Singapore’s data centre investment turnover was $397.82 million in 2021, 1.85 times the volume of the previous year, according to the report.

Colliers noted that the Covid-19 pandemic caused delays in the construction of new data centres.

But it added that more data centre power supply is expected to come onto the market this year.