Keppel Corporation, a giant multi-industry investor from Singapore which has a dozen projects in Vietnam, has expressed its intention to participate in the data centre market in Vietnam, in addition to real estate and energy.

Joseph Low, real estate president at Keppel Vietnam, said that along with real estate, it sees promising opportunities in the energy and data centre sectors, given the growing emphasis on the green and circular economies in Vietnam.

“We are making significant progress in these sectors, notably with the launch of our operations nerve centre to offer long-term solutions to many domestic customers,” Low said.

Ho Chi Minh City’s ambition to be a strong financial hub will require data centre coverage

The growing trend of cloud services and the Internet of Things tech is leading to growth in data traffic and computing power. Businesses and organisations must own or rent more data centre systems for the purpose of storing, managing and processing huge amounts of information to compete in the digital environment.

According to experts, the profitability of investing in a basic data centre depends on many factors, such as the level of space usage, operating costs, electricity costs, maintenance, and upgrade costs. In general, the profit rate of this type is quite high, ranging from about 8-15 per cent, even reaching more than 20 per cent depending on the scale, service quality, and location.

For investment funds, data centres are classified as a hunted alternative asset because it is a unique and low-volatility asset class. The combination of this type of asset with stocks or real estate will help reduce risks to the investment portfolio.

According to the Asia-Pacific Cities Maturity Index issued by Cushman & Wakefield (C&W) at the end of 2023, 29 data centres operating cities are classified into four categories: emerging, developing, mature, and powerhouse. The ranking is based on 21 data parameters to compare markets according to current status as well as development potential in the next five to seven years. Ho Chi Minh City and Hanoi are ranked in the emerging category.

According to Pritesh Swamy, director of Data Centre Research and Consulting at C&W, emerging markets are in a nascent stage of maturity but have attracted the interest of data centre operators due to local business and retail demand, and outstanding geographical location. “There remains plenty of development headroom in Asia-Pacific compared to other regions,” Swamy said.

Meanwhile, C&W’s 2023/24 Data Centre Construction Costs report released earlier this year said that Vietnam has the lowest average price in the region at $168 per sq.m for the construction of data centre projects.

The report on data centre project development costs includes land purchase prices, demolition and site clearance costs, and construction costs of standard and premium centres in Asia-Pacific, across 37 cities in 14 key markets.

The five markets with the highest average per sq.m land prices in the region are Singapore ($11,500), South Korea ($9,700), Hong Kong ($3,400), Japan ($3,300) and mainland China ($2,900), with high prices primarily due to the scarcity of land along with available power sources, combined with rising interest rates.

Asia-Pacific is a region witnessing strong expansion of data centres. So far, the region has a 9.8GW of capacity in operation, with 3.4GW of capacity under construction and 8.8GW of capacity in planning.

Currently, the domestic data centre market is fragmented, with more than 30 data centres invested in and providing services through more than a dozen domestic and foreign enterprises and joint ventures.

While international operators such as NTT Global Data Centre, Telehouse, and GIC-backed VNG Cloud have a presence in the market, the common approach for new players is to partner with local telcos such as FPT Telecom, Viettel Group, VNTP, and CMC Telecom.

According to a report by Research and Markets, the scale of Vietnam’s data centres market is increasing at a compound annual growth rate of 10.68 per cent for 2022-2028, and is expected to reach $1.37 trillion by 2028.

John Campbell, head of Industrial Services Savills Vietnam Despite a sizeable quantity of data centres in Vietnam, most of them are small. However, there are a few larger ones, such as the Viettel Data Centre, which has a capacity of over 20MW and is the largest data centre in the country in terms of power capacity. Recently, there has been a lot of interest in data centres in Vietnam due to the introduction of new non-traditional telecommunication services. This has created opportunities for foreign investors, but there are also some limitations to be aware of, such as the legal framework for infrastructure sharing and data protection. We expect the government to make an official announcement on these new regulations in July, and if this happens, the second half of this year could be very interesting for data centre investors, both foreign and domestic.