Why HK's latest data center land plot drew so many bids

December 14, 2018 09:06
Data center demand will continue to grow due to the advance of cloud computing and technologies such as big data. Photo: Sunevision

The Hong Kong government sold on Wednesday, for HK$5.46 billion, the second land parcel specifically earmarked for the purpose of building a data center.

The auction attracted nine bidders and the winning bid, at HK$4,500 per square foot, was 45 percent above market expectation.

That auction price is five times the per-square-foot price of a nearby land plot, also for data center use, sold five years ago.

As demand for internet speed, capacity and security keeps rising, requirements on data centers are also becoming tougher, leading to strong demand for high-grade facilities.

Back in 2013, the Hong Kong government put up the first land plot in Tseung Kwan O for auction for high-end data center purpose.

As a greenfield project, this land plot allowed operators to customize details to meet the most stringent requirements, such as the installation of fiber optics, high-grade power and cooling systems, etc.

A data center land plot also has the feature of being located away from industries of high risk nature, and the location typically bears a minimum risk of flood or landslide, all crucial to enhance the safety.

Sunevision (01686.HK), the information technology unit of Sun Hung Kai Properties (00016.HK), won that site for HK$428 million.

The price tag was only HK$904 per square foot. The site was built into MEGA Plus, a Tier 4 standard data center now said to be sought-after by high-end customers.

With a plot ratio of 4.5, this second site will house a structure with an area of 1.21 million square feet. Sunevision has won the bid again this time.

It’s expected that data center demand will continue to grow.

With the advance of cloud computing and technologies such as big data, multinational firms are scrambling to set up their operations in all major business hubs around the world.

To rapidly expand their presence overseas, most of them prefer to lease data center facilities from local operators when they venture outside their home turf.

As such, we can expect strong demand from companies like Alibaba, Google and Amazon, which have reportedly encountered difficulties in securing enough space for their servers and other computing equipment.

Sunevision is currently the top data center operator in Hong Kong. Japan’s NTT Corporation and CITIC Telecom International are also key players.

This article appeared in the Hong Kong Economic Journal on Dec 13

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist