Analyst Sees Malaysia To Emerge As Largest Data Center Hub In ASEAN

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Analyst Sees Malaysia To Emerge As Largest Data Center Hub In ASEAN

KUALA LUMPUR, Oct 2  (Bernama-Xinhua) -- RHB Research said Wednesday that Malaysia is set to emerge as the largest data centre hub in the Association of Southeast Asian Nations (ASEAN) region with about 4 gigawatts (GW) of inventories projected to come on stream over the next four to five years, Xinhua News Agency reported.

The research house said in a note that approximately 2 GW of inventories are under construction and committed for, largely in Johor state, with close to 3 GW in developmental stages.

"This capacity is in the developmental stages, and will be added progressively over the next three to five years," it noted.

According to RHB, potential data centre inventory by 2028 would be 10 times more than what it took the industry to build over the last two decades.

This would put Malaysia ahead of Singapore, Asia's largest data centre metro where capacity is projected to stabilize at 1.4 GW due to land scarcity and stricter conditions imposed on new builds, it added.

RHB also noted approvals for data centre investments in Malaysia are expected to hit another high in 2024, ahead of the guidelines to be enacted on new builds with the investment pipeline looking strong going into 2025.

"We continue to see data centre-related news flow shaping market sentiment on the back of structural demand, the lower interest rate environment and multi-year investments by hyper scalers," it said.

The investments act as a strong funnel for growth, adding to the investments by wholesale co-location providers, said the research house.

"We see the strong commercial proposition of data centres spawning more mergers and acquisitions and strategic partnerships across multiple stakeholders, fueling an expansion in transaction multiples," it noted.

It also opined that agricultural landowners are warming to diversification opportunities in light of declining yields from traditional crops.

RHB sees accelerated adoption of artificial intelligence (AI) catalyzing demand for scalable data center infrastructure.

"The prolific cycle of investments should downplay growing concerns over an inventory oversupply, in our view," it said.

It noted the risks of a supply glut should also be mitigated by data compliance and residency requirements, modular expansion undertaken by data centre owners and the need for older facilities to be retrofitted to meet current needs.

RHB also sees data centre investments as a catalytic enabler to raise Malaysia's economic complexity and move up the technology ladder. 

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