Philippines offers cheapest cost for data centers in Asia-Pacific

The Philippines posted the cheapest construction costs for data centers in Asia-Pacific with a $4.59 per watt cost, according to a report by a global real estate consultancy.

In its recently launched APAC data center cost guide, Cushman & Wakefield said regional medium cost per megawatt (MW) in the Philippines stood at only $4.59 million compared to Taiwan’s $6.15 million and Vietnam’s $6.7 million per MW.

In contrast, Japan registered the highest cost per MW in the region at $12.73 million.

This was followed by Singapore and South Korea with cost per MW of $11.2 million and $9.2 million, respectively.

“Asia-Pacific today is a development-developers’ market, with existing participation by most large groups. Private products created during the development stage by these groups have often traded to a public long-term hold, such as a REIT,” Cushman & Wakefield Asia-Pacific head of capital markets Gordon Marsden said.

“While the sector enjoys tailwinds, whether investment volumes will be enough to propel the sector into the mainstream remains to be seen. Assuming between three percent and eight percent of the stock to be completed over the next decade becomes available as individual asset sales or portfolio sales unencumbered from an operational exposure or some form of pre-emption, and depending on the criteria for evaluation, if possibly could,” Marsden added.

In the same report, Cushman & Wakefield ranked Metro Manila as the eighth market with the most expensive land costs for data centers in the region, registering a medium average cost of $3,588 per square meter (sq m).

In addition, Clark also ranked 36th in the index with land cost at $136 per sq. m.

Apart from Metro Manila, provincial locations, particularly Laguna, Batangas, Cavite also ranked 27th in the regional land cost index with medium average cost at $694 per sq. m.

Singapore ranked first in terms of the most expensive land costs at $11,573 per sq.m. This was followed by South Korean cities Seoul and Busan with land costs of $10,525 and $8,865 per sq.m., respectively.

“As a whole, Asia Pacific is attractive to investors for its comparatively low land and development costs and for the growth potential in both developed and emerging markets,” Cushman & Wakefield said.

Although supply chain disruption and supply/demand imbalance for both labor and materials remain in recovery, raw material prices, energy and transport costs remain at an all-time high and continue to contribute toward record construction costs,” it added.

Overall, Cushman and Wakefield said Asia-Pacific has seen an average increase of 4.9 percent on 2022 construction pricing.

Source: Philstar

PH to attract data center investments

Property consultant Jones Lang LaSalle Inc. (JLL) said the Philippines is poised to attract a significant level of investment in data centers, amid increasing demand for cloud-based services globally, particularly in the e-commerce sector.

“Demand for data centers – the buildings that house computer systems and servers that store and process the world’s data – has skyrocketed due to the widespread adoption of digital communication tools and e-commerce,” JLL said.

On Tuesday, Santos Knight Frank, another property consultant, said it is tracking 220 megawatts (MW) worth of expressed interest, 90 MW of which came in the second quarter of the year alone.

Charlie McNaught, JLL Philippines director for capital markets, said the interest in the data center sector in the Philippines is not surprising, given that it is home to 76 million internet users who spend an average of more than 10 hours on the internet daily.

“This provides a solid base to fuel data consumption which is expected to further grow as we anticipate greater data demand in the future on the back of wider technology adoption.

With the sector in the Philippines still in its early stages of development, it allows managers to plan in their development strategy to ensure their facilities are constructed and operated in line with current and future ESG (Environmental, Social and Governance) expectations,” he said.

Driven by the shift to cloud-based internet services and online retailing, competition for assets has intensified, thus data center real estate is attracting more interest from publicly traded real estate investment trusts, private equity groups and sovereign wealth funds, JLL said.

“The investment in data centers in the Philippines is expected to grow considerably in the coming years. It is critical that more emphasis is placed on environmental considerations to ensure these newly developed assets are future proofed,” said McNaught.

However, according to JLL analysis, the lack of global data center standards makes it difficult to report in-depth ESG metrics. The same respondents believe the responsibility is on operators to develop their own clear and well-defined key performance indicators to gain the investor trust crucial to create shareholder value and maximize returns.

“The growth of data centres in Asia Pacific comes with a mounting environmental cost but provides necessary impetus for investors and operators to enact more sustainability-based operational and development practices,” said Kamya Miglani, head of ESG Research, Asia Pacific, JLL.

“As more data centers are required regionally, the conversation will inevitably shift towards greening the real estate supporting this sector and alignment with more aggressive ESG strategies,” added Miglani.

Source: Malaya