The strong push Malaysia is making to roll out a second 5G network starting next year and the growth of e-commerce is anticipated to boost demand for data centres in the country, which would, in turn, boost the housing market as more people look for a place to reside with expanding job prospects.
"A second 5G network will likely increase uptake (for data centres). For e-commerce, most analysts expect the market to grow at a 13.6 per cent compound annual growth rate through 2027. By 2027, e-commerce could be worth US$17 billion to Malaysia," said Kashif Ansari, the co-founder and group chief executive officer of Juwai IQI.
The data centre market is expected to grow at a compound annual growth rate of 9.4 per cent to 12 per cent in 2028, depending on the forecast. The market will attract new inbound investments worth US$2 billion to US$3.1 billion by 2028, according to researchers.
Behind this growth are some of the biggest companies in the world. Google Cloud, Microsoft Azure, and Amazon Web Services are all establishing bigger and better infrastructure in the country.
"Amazon Web Services is a great case study because they are investing US$6 billion in Malaysia over the next 14 years to create data centres that will prevent potential disruptions and provide low latency to local businesses," he said.
Other players continue to pile into the sector. Just last week, Australian data center operator NEXTDC said it would accelerate its expansion plans in Malaysia and is raising US$419.2 million in part to do so.
In Malaysia, there are now 33 data centres, and at least a dozen more are in the development pipeline.
The top three states for data centre locations are Cyberjaya, Kuala Lumpur, and Selangor, with Johor coming in fourth.
According to Kashif, Malaysia has 600 industrial estates with good connectivity, which might make them desirable locations for new data centres.
He said that Malaysia has become a leading market for data centres in the Asia Pacific region (APAC), drawing billions of dollars in investment from multinational tech firms.
According to him, Malaysia's place at the top of the list may be attributed to its friendly political climate, high levels of connectivity, sizable population, abundance of land that is competitively priced, accessible renewable energy, geographic location in the middle of ASEAN, and right close to Singapore.
"Malaysia has an advantage in both energy and land. You can't build a data centre without a parcel of land, so it is more difficult to build data centres in markets with high land costs. Malaysia has a significant advantage over other markets when it comes to land costs," he said.
Kashif said, of the top data markets in the APAC, Johor and Kuala Lumpur have the lowest land costs.
According to him, land in Kuala Lumpur and Johor can be purchased for data centres for around one-fourth the price of equivalent land in Northern Virginia (United States), the world's most lucrative market for data centres.
"Another significant cost in data centre operations is energy. Operators are very sensitive to their contribution to climate change and don't want dirty energy. Data centres are tremendous consumers of energy. They consumed 190.8 terawatt-hours of energy usage worldwide in 2021. They also contribute about one per cent of energy-related greenhouse gas emissions every year.
"Data centre operators are under constant pressure to reduce their energy usage costs and environmental impact. Malaysia is attractive because green energy will account for about 40 per cent of all power generation by 2035," Kashif said.
Despite Singapore being the third-biggest data centre market in the world and one of APAC's major data consumers, the challenge for the Republic is the scarcity of land and affordable green energy.
"Singapore only recently removed a moratorium on new data centre construction but has retained some strict rules on what can be built. Therefore, Singapore's data centre vacancy rate is just two per cent, a worldwide low for major markets. This gives Malaysia an opportunity," he said.
Kashif said an example of what growth in the data centre market will look like in the years to come can be found at the YTL Green Data Centre Park in Johor, with Singapore's Sea Ltd as the anchor tenant.
"This example shows that the data centre boom is bringing the most advanced construction techniques, sustainable practices, and innovative technology to Malaysia. Data centres mean more than billions of dollars of growth. They also mean high-quality jobs and a green economy," he said.
