From the outside, the windowless warehouse-sized building on the outskirts of one of Asia’s big cities does not look like much. But make no mistake: the anonymous shell of a data centre hides a hive of activity. Simply put, these are the building blocks of our online world.

They are also one of the world’s most dynamic markets and experiencing an explosion in growth, whether we look at their power needs, their capital requirements or the speed with which they have entered public consciousness.

This is certainly true of Asia, which accounts for US$155 billion of what is a roughly US$400 billion global market, according to Statista – almost as much as the United States and more than Europe. The rate of expansion, at 20% to 30% a year also matches that of North America, and shows no signs of slowing.

Across Asia-Pacific, this growth has historically been concentrated in the major metropolitan centres of Hong Kong, Singapore, Sydney and Tokyo, as well as Beijing and Shanghai.

While clients have been willing to outsource their servers and see them placed in the custom-built facilities that became the first ‘co-location’ data centres, they wanted to keep them close to their headquarters and office campuses – not least to reduce the latency ( delay ) that computer networks experience as distance increases.

Rise of new growth markets

In recent years, however, data centres have started to be built further away from the big city centres. A number of new markets are developing very rapidly, including Melbourne in Australia, Osaka in Japan, Seoul in South Korea and Johor in Malaysia.

One reason for this is that the latest ( and biggest ) data centres are being dedicated to training large language models and other artificial intelligence ( AI ) applications. For these use cases, latency matters less than, say, for streaming videos or executing automated financial trades.

However, it is also the case that the new AI chips supplied by the likes of Nvidia consume five to 10 times more power than previous generations of semiconductors and require a lot more cooling. The reality is that the extra electricity required can prove difficult to find in the primary cities: Tokyo, Sydney and central Seoul are power constrained, and it can take two years or more to secure a grid connection.

Meanwhile, Singapore put in place a moratorium on new data centre construction between 2019 and 2022 and has since strictly limited permits, in view of its environmental commitments.

As a result, the ‘hyperscalers’ that dominate cloud computing and are now investing heavily in AI, such as Amazon, Google and Microsoft from the US, and China’s Alibaba and Tencent, are exploring new locations.

And they are looking not only for power but for clean power, given their own stringent environmental targets – with most of the big firms having committed to full decarbonization of their own operations by 2030. At the same time, they are exploring new, efficient cooling technologies, such as direct-to-chip and immersive cooling, that can reduce consumption of both water and power.

Add the fact that finding suitable sites, managing construction teams and applying for permits is not their core business, and it is no surprise that specialist operators have sprung up to handle the entire process from securing land to handing over a fully constructed ‘shell’ that has power, cooling and fibre optic connections installed and is ready to receive the hyperscale customer’s hardware.

Specialist advice for specialists

In Asia, these companies include AirTrunk, which was recently sold to Blackstone for an enterprise value of US$16 billion as well as STACK Infrastructure, CyrusOne, Digital Realty and Equinix.

The specialists have large and growing capital needs as the size of data centres continue to increase.

Such financings are also becoming more complex and, these days, can cover a portfolio that includes multiple jurisdictions and is in various stages of development. In addition, there is a need to arrange green or sustainable loans and bonds in many cases.

These companies would seek financing and advice from banks on all of these aspects. Banks also help these companies navigate local regulations and financing norms, which is valuable for those who come from a single jurisdiction but are expanding into new markets. But while each Asian country tends to have its own set of rules, what unites them is the rapid growth of data centre infrastructure across the Asia-Pacific region.

Marie Vinnell is the chief country officer for Australia and Eugene Tan is the head of TMT for Asia-Pacific at Société Générale.