Data center development, new opportunities for Vietnam real estate

Demand will increase in the future

With the explosion of the digital economy worldwide, there is a need for the development of large data centers that can handle the digitalization of huge volumes of data.

In Cushman & Wakefield’s annual report ranking key data center markets around the world, Ho Chi Minh City is among the top 10 markets with affordable land prices for data centers. Meanwhile, the largest markets in Asia Pacific are under particularly high pressure from rising land prices.

According to the unit's Asia Pacific Data Center Report for the first half of 2023, cities such as Beijing, Shanghai, Singapore, Sydney and Tokyo account for 62% of the operating capacity of all data centers across Asia Pacific .

Data centers require land and power but do not put pressure on infrastructure when in operation.

Emerging markets such as Indonesia, Malaysia, Philippines and Thailand are also experiencing strong growth in the data center sector, which is on track for good growth over the next five to seven years.

Meanwhile, as data centers continue to grow in size, operators are continually looking for new markets to expand in anticipation of increased demand from digitalization and artificial intelligence. In the top five markets, the average size of data centers under construction increased by 32% to 20MW, up from an average of 15MW of data centers currently in operation.

Cushman & Wakefield experts also said that Vietnam is an emerging data center market because there are only a few multinational companies here with high data demand. However, because Vietnam still lacks the most data center infrastructure in the region, it opens up great opportunities for investment and development of this type.

From the figures, Vietnam's digital economy also grew by 28% year-on-year in 2022. A report by Google, Temasek and Bain & Company estimates that the annual growth rate will continue at 31% until 2025.

Many opportunities and advantages

According to Cushman & Wakefield, Vietnam has many factors that show great potential for future data center development, with more than 70% of the population using the internet. However, Vietnam's current data and digital infrastructure is still fragmented and underdeveloped compared to the market's population size and demand for internet services.

These limitations are also opportunities for investors to participate and build data centers early. According to Cushman & Wakefield, most foreign developers coming to Vietnam will want to sign cooperation agreements with domestic developers.

In terms of location, land prices in Ho Chi Minh City are also increasing amid the increasingly scarce land fund and limited current or future power supply. This is pushing data center development projects to neighboring provinces such as Binh Duong or Dong Nai.

Industrial parks are also suitable to "welcome" data center investment.

However, in Ho Chi Minh City, some large data centers have also been developed such as Tan Thuan Data Center of CMC Telecom with a total area of 13,133 m2; EC51 Data Center of Edge Centres, an Australian data center company...

In addition, by the end of 2022, VNG Company will put into operation a new and internationally standardized data center called VNG Data Center, in Ho Chi Minh City with an initial scale of 410 rack cabinets and will expand to 1,600 cabinets. This is 1 of 3 data centers in Vietnam to achieve Tier III certification for both design and installation equipment issued by Uptime Institute - the world's most prestigious data center evaluation system.

At the same time, Viettel launched the Viettel Cloud ecosystem with the largest data center infrastructure in Vietnam with 13 centers, a scale of more than 9,000 racks, on an area of 60,000m2 of floor space with a total investment of 260 million USD. This is Viettel's third project in Ho Chi Minh City. The group also announced that it will invest an additional 10,000 billion VND in Viettel Cloud to expand the scale to 17,000 racks by 2025.

Compared to other types of real estate, data centers have more advantages because there are not too many requirements related to the location of the center. At the same time, when operating, it does not put a burden on the infrastructure in the area. The only weakness of this type is the large and continuous power consumption, to ensure limited latency in data transmission.

For that reason, to attract investment in data centers, it is necessary to develop the power supply system of the facility and the area to meet the continuous needs of the tenant. This ensures the long-term and sustainable development of this type of investment in Vietnam.

In addition, Cushman & Wakefield also commented that the legal framework for data centers in Vietnam is still not complete, but the Government is actively developing clearer regulations on data protection and domestic data center services.

Source: https://www.congluan.vn/phat-trien-trung-tam-du-lieu-co-hoi-moi-cho-bat-dong-san-viet-nam-post262920.html