The emergence of trends in AI, big data, smart urban construction, e-commerce, and the ambition to position Ho Chi Minh City as the region’s foremost financial hub are all paving the way for investment opportunities in data center development.
Joseph Low, the real estate president at Keppel Vietnam, highlighted the company’s interest in the energy and data center sectors alongside real estate, citing the growing emphasis on green and circular economies in Vietnam.
“We are making significant strides in these sectors, particularly with the launch of our operations nerve center to provide long-term solutions to numerous local clients,” stated Low.
The increasing adoption of cloud services and Internet of Things technology is driving the expansion of data traffic and computing power. Businesses and organizations are compelled to procure or lease more data center infrastructure to store, manage, and process vast amounts of information to remain competitive in the digital landscape.
According to experts, the profitability of investing in a basic data center depends on various factors such as space utilization, operating expenses, electricity costs, maintenance, and upgrade expenses. Generally, the profit margin for this type of investment is quite substantial, ranging from about 8-15 percent, potentially exceeding 20 percent depending on scale, service quality, and location.
For investment funds, data centers are considered an attractive alternative asset due to their unique and low-volatility nature. Combining this asset class with stocks or real estate can help mitigate risks in the investment portfolio.
According to the Asia-Pacific Cities Maturity Index released by Cushman & Wakefield (C&W) in late 2023, 29 cities with operational data centers are categorized into four groups: emerging, developing, mature, and powerhouse. Ho Chi Minh City and Hanoi are classified as emerging cities, indicating significant growth potential over the next five to seven years.
The report on data center project development costs encompasses land acquisition prices, demolition and site clearance expenses, as well as construction costs of standard and premium centers across 37 cities in 14 key markets in the Asia-Pacific region.
The five markets with the highest average per square meter land prices in the region include:
Singapore ($11,500), South Korea ($9,700), Hong Kong ($3,400), Japan ($3,300), and mainland China ($2,900), attributed mainly to land scarcity, available power sources, and increasing interest rates.
