Date
20 November 2017
Kris Kumar, senior vice president and Asia Pacific regional head in Digital Realty, says tenancy agreements hamper data centers from keeping up with demand in Hong Kong. Photo: HKEJ
Kris Kumar, senior vice president and Asia Pacific regional head in Digital Realty, says tenancy agreements hamper data centers from keeping up with demand in Hong Kong. Photo: HKEJ

Digital Realty aims for rainmaking cloud business in HK

It’s been a surprise but a pleasant one. Executives at US-listed REIT Digital Realty did not anticipate just how robust demand in Hong Kong would be for data center services after it opened its first center in the city in November.

“It took only four months to lease out half of the capacity [at our Tseung Kwan O data center] — the fastest speed in the company’s history,” Asia-Pacific regional head Kris Kumar said.

The site covers 180,000 square feet and operations of a similar size usually take three to four years to lease out completely, Kumar said.

As one of the 20 biggest publicly traded US real estate investment trusts, Digital Realty buys, develops and runs data centers. It had 131 properties in 30 markets in Europe, North America, Asia and Australia as of March 31 and its customers include CenturyLink, IBM, Telx and Equinix.

Data centers store and manage data for clients and are becoming increasingly important as more companies and organizations shift to cloud-related services such as Platform as a Service. Even industries like healthcare, which have specific privacy and security issues, are going deeper into the cloud. 

“Cloud computing in healthcare a popular and forward looking demand in the data center industry in North America,” Kumar said.

Researchers MarketsandMarkets put the North American healthcare cloud computing market at about US$1.75 billion last year and expects the figure to more than triple to US$6.46 billion by 2018.

Demand is also on the rise in the Asia-Pacific region. Digital Realty said that almost half of the companies it surveyed in the region expect their data centre budgets to increase by 5-10 percent in the next 12 months.

“About 60 percent of demand for data center capacity in the Asia-Pacific region is from cloud-related services,” Kumar said.

Kumar said demand for cloud services in Hong Kong had only started taking off in the last year. But market researchers Vanson Bourne project that by 2018 about 36 percent of organizations in the city will outsource IT infrastructure such as colocation, managed hosting and cloud environments. That’s well above the expected world average of 25 percent.

Despite the expectations, a lack of space is a problem — a scarcity of land forced Google to scrap plans late last year to build a data center in the city. Kumar said another reason that supply has not kept up with demand is the length of tenancy agreements. That’s making it tough for Digital Realty to realize its plans to build a second, bigger data center in Hong Kong.

“The landlords [of commercial buildings] are extremely capitalized and have deep pockets. They don’t give customers long leases,” he said. Operators of data centers prefer to take out leases for between seven to 10 years, but Hong Kong landlords are reluctant to sign deals for more than three years.

In addition, Kumar said the company will provide direct connectivity services with several public cloud service providers soon, following on with the direct links built earlier this year between Amazon Web Services and those provided by Microsoft. 

– Contact reporter at [email protected]

MY/JP/SK

EJ Insight reporter

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