The amount of data flowing through our daily lives is flourishing. Every second Google processes more than 40,000 searches. Every minute there are 16 million texts sent around the world. Every day more than 300 million photos are uploaded to Facebook.

Where does it all live? Enter the hyperscale: giant data centers increasingly on the radar for investors.

“Hyperscales are data centres on steroids” says Pippa Webber, from JLL’s Alternatives team in Asia Pacific. “They can scale to millions and billions of users with 5,000-plus servers and 10,000 square feet of space.”

Facebook announced this autumn that it will build a hyperscale in Singapore. Chayora Limited, a Hong Kong-based data centre infrastructure company will be building its first hyperscale in Mainland China.

Data centers, along with other alternative real estate sectors, have become a greater focus for investors looking to new sectors in the hunt for yield. The global revenue for the data center market is growing at a 16 percent compound annual growth rate and is expected to reach US$60 billion by 2020, according to Structured Research.

For hyperscales, trading volumes remain low, but here’s what investors need to know about this nascent real estate sector.

1. Hyperscales – for now – are a small part of the data-centre world.
There were 420 hyperscale data centres operating worldwide as of August 2018. This is a mere fraction of the total number of data centres, which globally exceeds 8.6 million, with more than 3 million in the U.S. alone.

2. The need for hyperscales is increasing.
The number of people using the internet has grown from 2.5 billion people in 2012 to 3.7 billion in 2017, according to DOMO. And 2.5 quintillion bytes of data – that’s 18 zeros if you were wondering – are created each day. More than 90 percent of the data in the world was created in the last two years. Data usage is accelerating faster than places to store the data.

“Investors and developers with construction capabilities, access to large blocks of land and experience dealing with local authorities are likely to have a strategic advantage in the hyperscale wave,” says Bob Tan, Director of Alternatives for JLL Asia Pacific. “We know that there is no end in sight for cloud services. The demand for hyperscales will continue to rise, giving way to investors looking at alternative real estate investments to traditional data centers.”

3. Location is important
Data centers need roughly the equivalent annual output of 50 power plants, so energy pricing is a top factor when choosing location. Iowa, Nevada, Washington, New Mexico and Texas all remain top markets due to their favorable cost per kWh, economic incentives and secure environments.

Across Asia Pacific, key markets include Singapore, Hong Kong, Sydney and Tokyo.

Asia Pacific is likely to be the fastest-growing region in terms of data center location, according to Cisco’s Global Cloud Index: Forecast and Methodology, 2015–2020. It’s expected that by 2020 hyperscale data centers will house 47 percent of data servers globally.

4. Tech companies invest in their own hyperscales.
The hyperscale market remains niche. But growing tech companies are building and investing in their own hyperscales.

One reason: security.

But with a growing need for security and reliability of data across all sectors, it’s expected that industries like banking, oil and gas and pharma are the next wave of users for hyperscales. Across Asia, the number of build-to-suit hyperscale data centers continues to rise due to strategy, cost efficiency, resource considerations, or to achieve speed to market.

4. Companies are spending money on the sector.
The capex of hyperscale operators was up 59 percent from a year ago, according to Synergy Research Group, meaning companies are increasingly investing in their data infrastructure.

“Capex has reached levels that were previously unthinkable for these massive data center operators and it continues to climb,” says John Dinsdale, a Chief Analyst at Synergy Research Group. “The largest of these hyperscale operators are building economic moats that smaller competitors have no chance of replicating. In cloud computing especially, the ability to fund hyperscale capex levels has become a competition killer.”

Click to read more about capital’s shift into alternative real estate in Australia.


Bob Tan

Director of Alternatives, Asia Pacific Capital Markets at JLL