The Singapore data center colocation market is projected to nearly double in the next five years as hyperscale cloud providers; content and digital media companies; and network and IT service providers expand further into emerging markets in Southeast Asia, according to a new report by cloud and data center focused Structure Research.
Singapore is a major financial center, so it’s a natural colocation hub to serve emerging markets in Southeast Asia and in India, said Jabez Tan, Structure’s head of research.
“Singapore is a small country, so you would not imagine a lot of data center capacity, but it’s the only mature economy in the region," Tan said in in an interview with Data Center Knowledge. "They deploy data centers there because it’s safe geopolitically to serve adjacent markets like Indonesia, Malaysia, Thailand, the Philippines, and even India,”
The Singapore colocation market reached $1.1 billion in revenue in 2018 and will grow to $1.96 billion by 2023, according to the report which came out in April. The market is expected to grow 14% year-over-year in 2019.
Network and IT services are currently the largest spenders of colocation capacity in Singapore, accounting for 28% of the market, followed by hyperscalers at 20%, financial services at 16%, and government at 14%. Content and digital media at 12% and other enterprises at 11% round out the market.
“Because of its status as a global financial hub, it’s natural for a lot of financial firms to deploy data center capacity in Singapore,” Tan said. “The government is also a notable buyer of capacity because of its smart city initiative. They are transitioning to a digital first nation, so there are initiatives around that.”
Hyperscalers and content and digital media companies, which includes video streaming and online gaming, are fueling explosive growth in the market and will account for a larger share of the market, he said.
In five years, network and IT services will remain the top spenders in colocation with 31% of the market, hyperscalers will grow four percentage points to 24%, while content and digital media will grow six percentage points to 18%.
Hyperscalers Lease and Own
The Singapore market is the only hub in Asia-Pacific where hyperscalers are building their own data centers to augment their use of colocation providers, Tan said. Microsoft was the first hyperscaler to build in the country, followed by Google and Amazon Web Services. In September, Facebook announced plans to build the country’s largest data center.
With a combined power use of 330.1MW, hyperscalers currently own 27% of their Singapore capacity, leasing the other 73%. Tan believes the percentage hyperscalers lease will grow over time.
“They are still leasing from colocation providers to augment their existing capacity because they are growing so fast," he said. "They simply can’t build their own capacity fast enough to cater to the demands from their customer base."
As of now, hyperscalers are using Singapore as the entryway into emerging markets in Southeast Asia. Over time they will begin building data center capacity inside those countries, Tan said.
“They will depend on Singapore for the bulk of their data center footprint because it’s safe and a low-risk place to expand into, but they will look to expand their footprint into some of these emerging markets,” he said.
Land Scarcity Limits Market
Overall, Singapore is the second largest colocation market in Asia-Pacific with 357MW of total capacity in 2018, ahead of Hong Kong which has 283MW of capacity but behind Japan with 827MW. The Singapore market will grow by an additional 108MW in 2019 and 2020 as four new data centers come online, the Structure report said.
Like Hong Kong, Singapore’s data center market is limited by land scarcity. Large plots of land and energy needed to power data centers are not easily attainable, the report said. Having said that, Singapore’s government does have a master plan and has land available that it can grant to specific companies that promote digital infrastructure growth in the country, Tan said.
“For cloud companies like Google, Microsoft and AWS, it was relatively easy to present a business case to the government and have government allocate land to them directly,” he said.
Hong Kong, by contrast, has other industries, such as commercial, industrial and residential developers, who compete for the same available land, he said.
Singapore’s colocation market has 48 data center providers operating 59 data centers that total 2.9 million square feet of data center space. Wholesale colocation makes up 51% of market revenue with the rest generated by retail colocation revenue. Wholesale will continue to outpace retail and reach 56% market share by 2023, the report said.
Equinix, Singtel and Keppel Data Centres are the top three data center providers in Singapore with a combined market share of 52% of the revenue. The top international providers are Equinix, Digital Realty Trust and Global Switch, the report said.