Amidst the surge in demand for computing and data storage services across Asia, global investors, including KKR & Co. and Warburg Pincus, are strategically directing their investments toward the region’s data center industry. This uptick is fueled by the increasing adoption of cloud services by major tech players like Amazon.com and Google, coupled with the rising prominence of generative AI and the expanding population across Asia.
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Growing Appetite for Data Centers
While the United States currently leads in hyperscale cloud revenue with a 49% share, Asia-Pacific is rapidly catching up, accounting for 29%. Projections suggest that the demand for data centers in Southeast and North Asia will experience an annual growth rate of approximately 25% through 2028, surpassing the anticipated 14% growth in the US.
KKR & Warburg Pincus: Strategic Investment Moves
In response to the escalating demand, investors are making strategic moves in the data center space. Bain Capital, for instance, recently announced a deal to privatize Beijing-based Chindata Group Holdings, while KKR & Co. secured a 20% stake in Singapore Telecommunications Ltd.’s regional data center business. Blackstone Inc. has also unveiled plans to launch its wholly-owned data center platform in Asia.
KKR sees significant potential in the Asia-Pacific region, with plans to invest up to $1 billion in equity in various data center projects over the coming years. According to Projesh Banerjee, the director of infrastructure at KKR, returns from such investments align with the mid-to-high teens targets set by KKR’s infrastructure strategy.
Despite the promising outlook, investors are grappling with the diverse regulatory landscape and complex development processes that characterize the Asian market. Ellen Ng, co-head of Asia real estate at Warburg Pincus, emphasized the importance of offering products and services across multiple markets to meet the diverse needs of users effectively.
Evolving Regulatory Landscape
Investors have intensified their focus on Asia’s data center market, they are keeping a close eye on the evolving government regulations around data privacy, national data sovereignty, and sustainability. Challenges notwithstanding, the region’s continuous growth in cloud services and AI is expected to drive competition for assets and resources further.
