JLL, Logos, Baker Mac Brace for APAC’s AI-Driven Hyperscale Boom: MTD TV

Data centre leasing in North America is breaking records amid a surge in AI-powered activity by US tech giants, and Asia Pacific is poised for its own hyperscale demand spike in the months ahead, according to a panel of experts who joined Thursday’s MTD TV segment.

During the hour-long session, which was sponsored by Yardi, Mingtiandi founder Michael Cole spoke to decision-makers from property consultancy JLL, industrial developer Logos and global law firm Baker McKenzie about how the expansion of major internet players from North America and Asia is driving demand for ever-larger server facilities.

The April-June period saw 850 megawatts of power capacity taken up in major US markets, making it North America’s biggest-ever quarter for data centre leasing, per a DatacenterHawk analysis. While tech innovation sometimes lags in Asia, the region is seeing hyperscale users shift from co-location data centres to build-to-suit leases as AI and streaming applications ramp up requirements, said Rachit Mohan, who leads data centre leasing for APAC and data centre capital markets for India at JLL.

“One of the things we are very excited about is the impact of generative AI and GPU-as-a-service type of companies,” Mohan said, referring to the graphics processing units used for training artificial intelligence. “We’ve been having a number of these conversations, and we feel we’re at a tipping point where in the next 12 to 18 months demand is really going to explode.”

Giants Embrace Self-Builds

US and Asian tech giants’ demand for data centre space has driven development and leasing in emerging markets like Indonesia and Malaysia, with American hyperscalers also very active in India, the JLL executive said. Large-scale needs are accelerating a trend towards self-built data centres, in an echo of how Chinese e-commerce titans Alibaba and JD cultivated their own in-house logistics divisions.

“Now, self-build doesn’t necessarily mean that it’s not on lease,” Mohan said. “They can work with developers like Logos, ESR, these kinds of developers can offer very good BTS solutions, which can be structured towards build-to-own or build-to-lease with the option to ownership. All kinds of deal structures are being seen in the market.”

Mandy Lan, a special counsel in Baker McKenzie’s Hong Kong office and a member of the firm’s real estate practice, said hyperscale leases have upended the market in terms of how such agreements are negotiated.

“In Asia, traditionally landlords have a lot of bargaining power and they dictate the terms of the lease,” Lan said. “Hyperscalers, they come with their own lease terms. They want to use their own template that has very specific, tenant-friendly requirements. So depending on who you are representing, negotiation can be a challenge and how the leases land and shape up really depends on who your counterparty is.”

In Hong Kong, some landlords are looking to enter the data centre segment from a traditional leasing perspective. “In that scenario, there’s quite a lot of conflict and it could be a challenge,” Lan said.

Sustainability Questions

With 9.7 gigawatts of operational capacity in APAC, 3.3GW under construction and 8.5GW in the planning stages, the hyperscale wave will raise sustainability concerns. Logos data centre head Paul Dwyer noted that regional developers like his company are faced with a shortage of renewable energy sources to plug into.

“At the moment it’s manageable,” said Dwyer, whose firm is a unit of Hong Kong-listed ESR. “It’s not as efficient as in other parts of the world, in Asia and Asia Pacific, and the fact that most of the grids out here aren’t providing the ability right now to be able to directly connect to renewables.”

Those circumstances can create opportunities, however, and Dwyer said the path forward is forging ties between data centre operators and alternative energy providers in the style of ESR Australia’s recently announced partnership with Solar Bay.

Southeast Asia Up Next

Following Thursday’s hyperscale discussion, the Mingtiandi APAC Data Centre Forum continues next week with a panel dedicated to the Southeast Asian market, after countries including Indonesia, Malaysia and the Philippines saw a surge of server shed projects announced over the last year.

Leading that discussion on Tuesday, 12 September is Zhang Yi, joint venture director for Asia Pacific at EQT-backed data centre operator EdgeConneX; together with Si Pei Lee, business development manager for data centres at French energy specialist Engie Southeast Asia; and Ai Leen Tang, a partner with Baker McKenzie member firm Wong & Partners in Malaysia.

Also next week, the forum will take a look at Japan and Korea on Thursday, 14 September. In that North Asia session, Mingtiandi will speak with Diarmid Massey, CEO for data centres at ESR; Bob Tan, an executive director with the data centre practice group on JLL’s capital markets team; Patrick Boocock, CEO for private equity alternative assets with real assets division at CapitaLand Investment; and Jing Zhou, a senior director with the alternatives and strategic transactions unit at US investment manager Nuveen.

Rounding out this year’s forum will be a spotlight interview on Wednesday, 20 September with Mark Fong, chief executive of sustainable data centre specialist Empyrion DC, who will be appearing together with James Chern, managing partner and chief investment officer with Seraya Partners, which has partnered with Empyrion in scaling up its regional platform.