Keppel Investing RMB 1.5B to Build First Mainland China Data Centre

Keppel Corp said late Thursday that its Alpha Data Centre Fund will invest RMB 1.5 billion ($213.7 million) to develop a greenfield data centre in Guangdong province, marking the Singapore-based conglomerate’s first foray into mainland China’s booming data centre industry.

Alpha DC Fund will build the 486,700 square foot (45,215 square metre) data centre in Tonghu Smart City, in the city of Huizhou, on a site which the fund is acquiring from a unit of Chinese real estate giant Country Garden Holdings for an undisclosed amount.

“Demand for quality data centres has been increasing rapidly with the expansion of the digital economy globally,” said Alvin Mah, CEO of Alpha Investment Partners, the private fund management division of Keppel Capital. “Alpha DC Fund is pleased to be able to capitalise on such growth in the Asia Pacific region through our investment in this project.”

Pandemic Bolsters Demand for Data Centres

The investment comes as the growth in demand for server co-location space in the region accelerates, with more companies allowing employees to work from home as governments enforced lockdowns and social distancing measures to curb the spread of Covid-19.

“We’ve seen enhanced real estate investment in the data centre space in recent years, and it’s being accelerated by the ongoing coronavirus pandemic,” said Rohit Hemnani, chief operating officer and head of alternatives in capital markets for the Asia Pacific at JLL.

Use of e-commerce and other digital services has increased in recent months as consumers holed up in their homes turned to online shopping, food deliveries, video conferencing and watching Netflix.

Even before the onset of the pandemic, growth in demand for data centres had been surging, drawing the attention of both developers and institutional investors.

“Many of the region’s most prominent investors and real estate firms had deployed billions into data centres in response to the cloud computing boom, with quicker downloads and greater efficiencies requiring a new set of technologies and spurring development of data centres,” JLL’s Rohit said.

Cushman & Wakefield predicted in August 2019 that by 2024 the value of Asia Pacific’s data centre market will climb to around $28 billion — 20 percent higher than the $23.4 billion projected for North America.

Greater Bay Area Opportunities

Keppel plans to develop its project in Huizhou together with Country Garden and local data centre operator Shenzhen Huateng Smart Technology over two phases to be completed in 2021 and 2022. Beyond those initial milestones, the newly acquired site has the capacity to develop another 538,200 square feet of gross floor area for future expansion.

“Coupled with our extensive experience in developing and operating data centres globally, this collaboration will allow us to deliver a safe, reliable and high specification data centre facility for customers in the Greater Bay Area,” said Wong Wai Meng, CEO of Keppel Data Centres. “The project will also contribute to the upgrading of information infrastructure and economic development in Huizhou.”

Once complete, the new facility, which is designed to hold up to 6,000 server racks, will be operated and managed by Shenzhen Huateng to Keppel Data Centres’ specifications.

Expanding Keppel’s Data Centre Footprint

Keppel group is taking on the Huizhou data centre project through Alpha DC Fund, a vehicle set up in 2016 with an initial $130 million investment by the Temasek Holdings-backed conglomerate.

The private investment fund is part of a multi-faceted data centre initiative by Keppel group that has led to investments in locations including Australia, Germany, Ireland, Italy, Malaysia, Singapore and the UK.

While the Huizhou facility is Keppel’s first data centre in mainland China, the group also operates a co-location facility in Hong Kong in partnership with HK Telecom’s PCCW Global.

In September last year, SGX-listed unit Keppel DC REIT, which is sponsored by Keppel Telecommunications & Transportation, agreed to acquire a pair of Singapore data centres from Keppel DC Fund and Keppel Data Centres Holding for S$585.1 million ($422 million).

In expanding into mainland China, Keppel Group is growing its bit barn footprint into what is expected to be among the fastest growing data centre markets in the world, driven by government support and robust growth of the country’s technology titans such as e-commerce giant Alibaba.

China is expected to spend more than $3.78 trillion developing digital infrastructure and related investments over the next five years, according to Haitong Securities.