Data center demand to triple in the next few years- JLL

Most businesses practically shifted parts of their operations online when the pandemic struck two years ago and internet activity increased globally as well.

The Philippines is no exception to this as social media use in the country has been strong and e-commerce adoption is projected to continue growing among the country’s young population, providing support to sustained increase in internet usage.

In line with this, Jones Lang Lasalle (JLL) Philippines said there has been a heightened need for strong data infrastructure to support the country’s data consumption, which is driving the demand for data centers in the country.

“JLL estimates that current total capacity in the Philippines is approximately 96-megawatts (MW). This figure may triple in the next few years as more data center players are expected to enter and expand their footprints in the country,” ,JLL Philippines head of Research and Consultancy Janlo de los Reyes said.

A data center, as defined by Santos Knight Frank (SKF) is a facility that gives access to applications and data using  complex infrastructure  for computing, storing, and networking.

SKF said that it has recorded approximately 125 MW of additional planned capacity from operators who expressed interest to build in the medium term.

It emphasized that COVID-19 has also accelerated the growth of data centers, driven by the greater dependence on technology as well as the growing demand for co-location, internet, and cloud services.

“The Data Center market is an exciting space for the Philippines. As the Data Center sector continues to grow alongside the increasing demand for data, we expect to see an upswing in activity for Data Center investments into the country,” said SKF Data Centers lead and manager for Occupier Solutions & Services Monica Gonzalez.

SKF said the Philippines has been in the radar of data center operators primarily for the local population’s high digital consumption.

According to Hoosuite, the number of internet and social media users in the Philippines rose by 6.1 percent and 22 percent in 2020 and 2021, respectively.

Data centers rising

JLL pointed out that starting last year, the local data center market already saw significant activity, with a number of companies disclosing plans to build data centers in the country.

Among these are Converge ICT Solutions Inc. which plans to build a P1-billion data center in Mandaue City, Cebu. The facility will initially have 300 racks which will be housed in a six-storey building together with a contact center.

Alibaba also shared its plan to open a data center in the country. Beeinfotech opened its 19,000 squarementer facility in Pasig City last July which has around 3,000 rack capacity.

Last December, Digital Edge announced a joint venture with the Threadborne Group to develop and operate a 10-MW facility in the country.

JLL pointed out that Space DC announced its plan to invest more than $700 million in a 72-MW facility in Cainta, Rizal. It added that the data center will be called MNL1 with JLL as the project manager.

Telco giant PLDT Inc. just recently started the construction of its 11th and largest hyperscale data center facility in Sta. Rosa, Laguna.

Recently, YCO Cloud Centers, a joint venture between JJYnchausti and Cloud Center, also plans to build a 12-MW facility in the Light Industry and Science Park IV in Batangas Province.

“The Philippines is a leading, dynamic technology and digital hub in the APAC region but underserved in terms of state-of-the-art data center and digital infrastructure,”YCO Cloud Centers CEO Nik de Ynchausti said, adding that demand for colocation, 5G, internet and cloud services continues to grow rapidly.

Data Centers to explore locations outside Metro Manila

JLL said data centers are expected to explore sites outside Metro Manila in 2022. This insight comes from analysis of data on MapIT, JLL’s proprietary location intelligence service tool.

“We used JLL MapIT to conduct a high-level due diligence on geohazards and access to critical infrastructure,”said Carl Dizon, JLL Philippines’ senior analyst for Capital Markets.

“Through MapIT, we can see that the current data centers in Metro Manila are almost within the reach of the geohazards. Most hyperscalers would have more stringent requirements about potential geohazards,” he added.

Dizon said the company uses MapIT to advise data center operators on which areas to consider, and landowners interested in hosting data centers as a quick check if their spaces pass the basic geographic requirements.

JLL said the exponential advancement in internet technologies resulted in data center demand from hyperscalers – companies that process huge amounts of data they use in their day-to-day operations.

“Data localization requires data collected from a population to be physically stored within the borders of the country. As it stands, the majority of the Filipinos’ data are stored in data centers overseas, “ JLL’s Dizon said.

Hyperscalers and foreign data center operators are expecting data localization policies as this is a growing trend across Southeast Asia.

Moreover, apart from  e-commerce, JLL said the Philippine government is also expected to serve as a significant demand source for data.

“The government’s Cloud First policy promotes cloud computing as the preferred technology to manage and deliver government services. This represents a sizable market for hyperscalers,” De los Reyes said.

That policy covers the executive branch of the national government, government owned and controlled corporations (GOCCs), state universities and colleges, LGUs, and vendors servicing the government, while congress, judiciary, independent constitutional commissions, and the Office of the Ombudsman are all encouraged to adopt it.

“The heightened need for strong data infrastructure by organizations is likewise expected to feed data center demand moving forward. As more companies digitize and turn to cloud platforms for seamless operations, we expect this increased reliance online to translate to greater data consumption that will prop up demand for data centers in the future,” De los Reyes said.