The Philippines is becoming a hotspot for data centers in the Asia Pacific region with 5 to 6 operators establishing their facilities in the country this year and propel the recovery of the property sector despite challenges in power supply and ESG (Environment, Sustainability, Governance) principles, according to leading real estate services company Santos Knight Frank (SKF)
During its virtual first press conference for the year, SKF forecasts that the country’s emerging data center sector will likely double its supply capacity in the medium term. Interests expressed by Data Center operators over the last 12 months have reached to more than 125 megawatts (MW) of additional planned IT capacity in the Philippines. Total IT supply capacity in the country is currently at 94 MW, according to Knight Frank research.
This developed as SKF Chairman and Chairman & CEO Rick Santos said the Philippine property sector is poised to see a positive year in the backdrop of an optimistic economic outlook for the country in 2022 amid the lifting of travel lockdowns.
While he cited energy supply issue, Santos expressed confidence there would be sufficient renewable energy to power data centers.
Santos also believes that ESG (Environmental, Social & Governance) will become even more relevant in the industry in 2022. Data center investors, he added, just have to position to be able to access international funds.
“The real estate sector is not just seeing green shoots but also a growing green movement across the industry. From Net Zero buildings to renewable energy assets, ESG is gathering pace as investors, landlords, and occupiers incorporate ESG considerations in real estate decision-making,” he said.
Kash Salvador, SKF director and head of investment and capital markets, said that in terms of demand, there are at least five to six groups looking to expand in the Philippines.
According to Salvador, these interests could translate to at least to 20 hectares of properties for this year. “It still depends on how fast they can they move in terms of their acquisitions, but the demand is there,” he said noting that the power supply is key thing in this emerging class asset.
Monica Gonzalez, SKF data centers lead and manager for occupier solutions & services, said data center investors are looking for areas that are relatively hazard free, which could be largely in the South Greater Manila Area particularly Laguna and Cavite.
Gonzalez noted that the current data centers in the country require five to seven megawatts in power supply that may require at least one to two hectares of lot, but the SKF is seeing larger data centers demand for 10MW expandable up to 50 MW. But the most recent announcement is for a 72 MW data center.
“So, this is the scale that we see from 10 MW up to 70 plus megawatts, so they would need at least one hectare up to two to this about one to two hectares, or possibly 10 megawatts data center,” said Gonzalez.
Already, first-mover YCO Manila Digital 1 has announced the construction of a 12 MW IT-capacity Data Center in Malvar, Batangas. This phased development plan begins with the construction of the site, a 10,000 sqm two-story Data Center including the first of four 3 MW data halls.
YCO Manila is he project of YCO Cloud Centers, a joint venture of local Filipino group JJYnchausti, and US-based Cloud Centers, which with many years of experience in US data centers. The project team plans to break ground in early June 2022, with delivery of first of four data hall planned for mid Q2 2023, Gonzalez said.
“The Data Center market is an exciting space for the Philippines. As the Data Center sector continues to grow alongside the increasing demand for data, we expect to see an upswing in activity for Data Center investments into the country,” Gonzalez added.
To illustrate, data centers are the buildings that houses servers and equipment that allow the Internet to work. Gonzalez explained that the more people do business digitally the more data is being consumed and stored in data center somewhere. Date center is the place where messages sent via chat groups such as Viber, Whats App, saving appointments to Google calendar, or take a picture for uploading in the social media accounts, listening to music or podcasts, video, order for food or groceries, banking transactions, or simply sending an email or join virtual conferences. These activities are all indirectly using a data center.
“The more we depend on the internet for services, or entertainment for processing or storage. Then the more we need data centers for all the storage space and computing power that's needed,” Gonzalez said.
In 2020, the value of global data center market was placed at $59.3 billion and is projected to grow to $433 billion in the next years or an annual compounded growth of 13.4 percent.
Among locations, Gonzales said, the APAC region is actually the fastest growing market for data centers in the world although the largest is still North America. In fact, Gonzalez said that 30 percent of global revenues of the whole data center sector will come from APAC region by as early as next year with capacity in the region doubling at almost 100 percent.
Some research showed Vietnam and Thailand among the emerging countries for the sector in Southeast Asia, but there are also reports pointing to the Philippines being positioned for high growth outlook.
In the past three quarters alone, the Philippines coverage is through 125 megawatts worth of interest in potential additional capacity coming from data center operators.
The interest in the Philippines, she said, is largely driven by the investment friendly climate and government support. Recently, the government announced that they intend to develop the Philippines as the next strategic hyperscalers hub in Asia Pacific.
“With that is the commitment to support the incoming players with laws, policies, investments and promotions, investment promotions, and incentives to help these operators establish his favorite facilities in the country,” she said.
The government also has committed support to help the country's enterprises and industries to digitize to enjoy the digital transformation, which means that these industries will be a major source of demand for the data center operator.
In terms of energy supply, Gonzalez said that data center operators are encouraged by the government thrust towards clean energy. Currently, the country actually has a good relation of renewable energy mix with power generation mix of 35 percent by 2030 and 50 percent by 2040.