COLLIERS RADAR DATA CENTRE | RESEARCH | | 8 APRIL 2020

Rosanna Tang Head of Research | Hong Kong SAR and Southern +852 2822 0514 [email protected]

Anthony Wong Assistant Manager | Research | Hong Kong SAR +852 2822 0588 [email protected]

THE FUTURE LANDSCAPE OF THE HONG KONG DATA CENTRE MARKET COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

The growth of cloud computing, the development of the Internet of Things (IoTs) and the growth of data Insights & Recommendations consumption from emerging industries, such as fintech, digital media, and e-commerce, have become the catalyst for the growing demand for colocation (or offsite third-party) data centres in Hong Kong. Data centres have recently captured In 2020, the Hong Kong government plans to launch its 5G network infrastructure on the back of the interest from Hong Kong investors and ongoing smart city initiative. The enhancement of internet speed and stability should increase the other stakeholders in the real estate confidence of corporates moving towards cloud storage and computing, while the media and market, despite the current market telecommunications sector will likely continue expanding its use of these technologies. downcycle and economic uncertainty the Currently, the data centre market in Hong Kong has been dominated by a relatively small group of local city is facing. and international operators. To cater to the strong growing demand, more data centres are required, The outbreak of COVID-19 has raised the which suggests investors and operators should tap into the sector through wholesale conversion or awareness of agile working and redevelopment strategies of existing industrial buildings amid the limited land supply. e-commerce, while growing broadband penetration, increasing adaptation of Market entry strategy - government supportive measures cloud services and the soon-to-be- Wholesale conversion – Land acquisition – Lease modification – launched 5G technology, are all pointing to change in use of parts of government land sales redevelopment to high-tier existing industrial buildings for data centres data centres increasing demand for data centres. > No fee for waiving any > Acquire government > The data centre portion of the Currently, over half of the data centre conditions through the sites from land sale redevelopment should be at space in Hong Kong (8 million sq ft or change of use programme that are least: 743,000 sq m) is clustered in the Tseung > The data centre conversion allowed to be – 40% of the maximum must take place in an developed for data permissible development GFA Kwan O area, and we estimate the total centre use data centre stock will grow by 23% over existing industrial building or, which is 15 years or older the next three years. Industrial buildings – a plot ratio of 2.5, whichever is > The proposed building into data centres higher The nature of this sector, with high must be in > Land premium* assessed based barriers to entry and long repayment- − Industrial (I), on high-tier data centre use for periods, means it is dominated by a few – Commercial (C) or the data centre portion key players. The lack of available sites – Other Specified Uses > The redevelopment must take remains one of the key challenges for (Business) (OUB) zones place on an Industrial lot investors. We recommend investors to look at Kwai Chung and Tseung Wan for Source: Colliers International; *Note: Developers are charged the land premium when they apply for rezoning their lands to other land use. Note: 10.76 sq ft = 1 sq m. This report covers the Hong Kong Special Administrative Region of the People’s Republic of China. conversion opportunities, and we believe Tuen Mun and should be better-positioned as the longer-term data Rosanna Tang Hannah Jeong centre options. Head of Research Head of Valuation and Advisory Services Hong Kong SAR and South China Hong Kong SAR

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RECOMMENDATIONS Cost comparison, wholesale conversion vs. redevelopment

Kwai Tsing for near-term opportunities Wholesale conversion Redevelopment Kwai Tsing, Kwai Chung and Tsing Yi, located in the western , Acquisition cost HKD4,000-7,000 (USD513-897) per sq ft is currently the largest industrial cluster, and the second largest data centre No land premium HKD2,500-3,500 Land Premium hub in Hong Kong following Tseung Kwan O. Although key players such as cost involved (USD321-449) per sq ft PCCW solutions, Equinix and Grand Ming Group have already entered the HKD2,500 market, we believe the districts still offer great opportunities for data centre Foundation and Construction Not applicable (USD321) per sq ft conversions given the large amount of industrial stock. For instance, the new data centre project developed by Hon Kwok should be completed this year, Substation Cost* Around HKD300-800 (USD38-103) per sq ft which should push Kwai Tsing to further evolve into a more mature data Source: Colliers International; *The substation connects the data centre to its electric supply. centre cluster. Wholesale conversion vs. redevelopment Tuen Mun and Lok Ma Chau as the potential clusters There are three key channels for investors to enter the market: apply for for longer-term options wholesale conversion, redevelopment of industrial lots through We recommend Tuen Mun and Lok Ma for longer-term data centre modifications, or acquire government lands for data centre usage. redevelopment options. This is in part to cope with demand, but also to offer New supply for tailor-made data centres greater geographic distribution in Hong Kong. Government sites would be predeveloped for high-tier data centres in terms The Lok Ma Chau Loop, a new site for HKSTP’s innovation park of planning and infrastructure. However, new lands for data centres have Lok Ma Chau is close to the Hong Kong- border, which may be been very limited, while the development size and cost is usually higher. We desirable by tech companies just across the border such as Tencent, Baidu, recommend this to investors with deep pockets including major operators and Huawei. The proposed 87-hectare Hong Kong- Innovation and and developers, absorbing the demand from large tech companies. Technology Park in Lok Ma Chau, specifically catering to R&D, technology and Redevelopment for large scale high-tier data centres start-up incubators, will likely benefit the development of data centres. Redevelopment of industrial buildings through lease modification would be Tuen Mun as the next opportunity with new an option against the limited new land supply. Investors, similarly, can tailor- infrastructure Lok Ma Chau made or built-to-suit through redevelopment. Additional cost, however, Tuen Mun serves as a strategic location, with the would be involved for acquiring existing properties, demolition and the land Shatin, premium involved during application for lease modification. Tuen Mun-Chek Lap Kok Link scheduled to be Tai Po & completed in 2020. This area is suitable for Tuen Mun Fanling Wholesale conversion as a “quick-win” option Kwai Chung & longer-term redevelopment opportunities, Tsing Yi although the land premium is one of key factors Wholesale conversion from industrial properties into data centres is Lantau Island regarded as an easier option for immediate availability. A larger flexibility is determined by investors and developers. We Tseung recommend investors focus on long-term Kwan O provided that any buildings located in areas zoned “I”, “C” or “OU(B)” are growth, while expecting stable returns once also allowed for data centre installation. This option would be suitable for landlords who want to better utilize their industrial buildings without developed, despite the high cost of market entry. Tuen Mun – Chek Lap Kok Link involving redevelopment costs. 3 COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

OPPORTUNITIES, RISK AND CHALLENGES

Opportunities

Lack of supply High customer stickiness > There is a growing demand from the mainland and > Frequent relocation is not preferable for data international companies looking for service expansions centres, as it involves high switching costs, and the in Hong Kong. risk of data loss or service disruption. > The supply-demand gap offers investment > Although operators may take time to achieve a high opportunities, given data centre supply remains limited occupancy rate, customers of data centres will likely in the next 2-3 years. stay with the same operator for a long period.

High property prices Stable and predictable income stream > Hong Kong remains as one of the most expensive places > The lease period for data centres ranges from eight in terms of business occupancy cost. to 10 years or longer, which will likely translate into stable recurring income for operators. > MNCs in Hong Kong have been actively increasing the ultilisation rate or efficiency of their workplace. Demand > We believe the stable streams of income makes for colocation data centres should likely stay firm. data centres attractive investments.

Value-add opportunities The Greater Bay Area initiatives > According to the government figure, vacancy rate of > While the Greater Bay Area (GBA) is planned to be flatted factories stood at 6% as at end-2019, suggesting an integrated economic cluster, Hong Kong is well- that some industrial spaces could be better-utilized. positioned to leverage its geographical and data > The current market downcycle coupled with the protection advantages as a regional data centre Revitalization Scheme 2.0 could mean the right time for hub. investors to consider data centre conversions.

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Risks Challenges

.Strong growing rivals Shortage of new land supply > As a gateway to Southeast , shares similar > In the past 10 years, the government has sold only two data advantages including robust data privacy regulation. centre sites with no new supply in upcoming financial year. > Singapore also edges Hong Kong with the fastest internet speed among the APAC region, with fewer unplanned power cuts, which may shift the regional data centre demand away from High investment costs Hong Kong. > Investment costs are relatively high as it requires a large floor plate, high-floor loading, high-ceilings and sufficient power supply as well as suitable surrounding area and site access. Local instability > In 2019, Fitch Ratings and Moody's both downgraded Hong Kong’s credit rating due to rising doubts on its political stability Lack of suitable properties and local governance, which could impact occupier sentiment. > Almost half of the industrial buildings in Hong Kong are strata- > Facebook and Google have halted plans to activate their titled, requiring additional costs to unify the ownership, making international submarine cable, the Pacific Light Cable Network conversion or redevelopment opportunities in those buildings (PLCN), between the US and Hong Kong, turning their attention difficult. to the Philippine's and Taiwan instead*. Long investment cycles > Investing in data centres involves a longer investment cycle while their liquidity is lower compare to other assets, which pushes some investors away.

* Source: Techcrunch, 7 February 2020

5 COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

BOOM IN DATA CENTRE DEMAND Forecast of technology usage in Asia Pacific and Hong Kong Asia Pacific Hong Kong Data centres have been emerging as one of the most appealing asset types in the real estate market. New technology advancement and cloud computing adoption have driven demand for data centres in the Asia region. According to Cisco’s projection, the Asia Pacific +57% +48% +2pps region will have 13.5 billion networked devices/connections by 2023, up from 8.6 billion in 2018, while the number of internet users should grow from 2018’s 2.1 billion to 3.1 billion 13.5 3.1 93% 95% 1 by 2023 . 8.6 2.1 Whilst Hong Kong is one of the most important global financial centres in Asia, data centre

demand is not only coming from cloud services, but a wider-spectrum of drivers including (Billion) the banking and finance sector, the multimedia and telecoms sector, and the IoT. Internet has also become an important means of communication for enterprises and individuals. According to government figures, the number of organizations using cloud-based services reached 292,100 in 20192, which represented 20% growth from 2017. Meanwhile, the household broadband penetration rate reached 93% as of October 20193, while Statista Networked devices Internet users Internet penetration 4 forecasts the penetration rate to reach 95% by 2023 . Source: Cisco, Statista Cloud computing and Internet of Things (IoT) Banking and Finance • Cloud computing is the delivery of computing resources (processing • Traditional banks and financial institutions have been gradually moving power and software) by a service provider over the internet to a user. towards e-banking and reducing physical service centres and offices. • Around 85% of the enterprises in Hong Kong used cloud computing • Banks are also diversifying services by providing innovative and enterprise services in 20192. 99% of information and communications sector solutions which involve additional demand for data storage and analysis. enterprises are using cloud computing services. • The rise of fintech companies and virtual banks require advanced data and • The tech giants Intel Corp. and Nvdia had strong revenue growth of 8% network infrastructure to ensure data security and low latency. and 41% YOY, respectively, in Q4 20195, thanks to a big jump in the sales of chips for data centres and cloud computing. Industries Big data and data analytics 5G: a game changer • Data has become the most valuable asset a company owns, playing an • Gartner forecasts worldwide 5G network infrastructure revenue to reach increasingly important role in decision making and business strategies, USD6.8 billion by 2021, increasing 208% from 2019. measuring and quantitating companies’ goals and success. • Hong Kong’s government is adopting a multi-pronged approach in • With information becoming more transparent and accessible, trustworthy facilitating the development and application of the 5G network and plans data has become the major distinguish factor in any industries. The private 5G services to be fully launched in 2020. sectors are encouraged to store large amount of data on cloud with low • The improvement of latency will likely drive the demand for cloud storage, costs, increasing the demand for data centres from cloud service real-time data and streaming. Data centres will likely not only expand but providers. also need upgrades amid the network transformation.

1 Cisco; 2 Report on the Survey on Information Technology Usage and Penetration in the Business Sector for 2019; 3 OGCIO; 4 Statista; 5 Intel, Nvdia 6 COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

GROWING DATA CENTRE DEMAND Examples of mainland companies’ data centres in Hong Kong

FROM MAINLAND COMPANIES Alibaba Cloud Tencent Cloud

The tech-savvy nature of China has boosted the development of cloud Data centre TGT Hong Kong Data Centre 2 HGC Global Centre computing, IoT and e-commerce. With its proximity to China, Hong Kong should benefit from the growing demand for secure data centre services from mainland companies. Chinese technology giants, such as Tencent, Location Tseung Kwan O Wong Chuk Hang Baidu and Alibaba, have also been driving the growth of the data centre market in Hong Kong. For instance, Alibaba Cloud has had a data centre in Hutchison Global Operator Towngas Telecom Hong Kong since 2014, while doubling its capacity in just five years6. Tencent Communications Cloud, which set up its first data centre in Hong Kong in 2013, also opened a second data centre in 2018 for expanding service coverage to the Greater Launch date May 2014 October 2013 Bay Area7. Source: Towngas Telecom; HGC CORONAVIRUS AS A WAKE-UP Percent of respondents, will the coronavirus outbreak boost demand CALL FOR BUSINESSES for telecommuting and data centres? According to Colliers’ recent Coronavirus: Impact On Chinese Real Estate report, 80% of data centre operators surveyed believe they will benefit from a growth in telecommuting demand. Remote office solutions and cloud computing No Limited The coronavirus outbreak has forced world’s largest work-from-home 9% clarity experiment, triggering the acceleration of digitalization and automation of Yes international banks and MNCs. Corporates, with a higher proportion of staff 11% working from home, will likely increase the use of tools such as Microsoft MyAnalytics that collect data for tracking the efficiency and wellbeing of 80% staff working from home. Online retail and e-commerce Consumer demand is increasingly shifting towards online shopping, and retailers should invest in online shopping platforms, enhancing omnichannel distribution strategies, as well as tools for data collection to analyse shopping patterns. 6 DataCenterNews, 18 January 2019. 7 Tencent, 26 March 2018. Source: Colliers’ report Coronavirus: Impact On Chinese Real Estate 7 COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

HONG KONG’S COMPETITIVE ADVANTAGE Average download speeds over fixed broadband Mbps Hong Kong (HK) has been vulnerable to typhoons due to geographical location. However, 0 50 100 150 200 250 Hong Kong is unlikely to see earthquakes, volcanos, tornados and large-scale wildfires. In Singapore addition, Hong Kong has a reputation for using best practices for data reliability and Hong Kong (SAR) protection, as well as having a stable power supply. These factors combine to make Hong Kong one of the best locations for data centres. Monaco Romania Why Hong Kong for data centres? Switzerland France Sweden Reliable Power Low electricity costs Network connectivity United States supply HK (CPL Power) Over 250 internet CLP Power Hong charges the lowest service providers Denmark Kong Limited (CLP), electricity tariffs licensed to provide one of two electricity among major cities broadband services in Source: Ookla Speedtest, as of Jan 2020 suppliers in Hong such as Singapore, HK10. HK has the Kong, achieves over Sydney, London and world’s second fastest 99.9%8 supply New York, at only internet download Unplanned power interruptions reliability for HKD1.15 (USD0.13) speed over fixed 20 Kowloon and the per kilowatt-hour broadband (170 18 New Territories. (kWh)9. Mbps)11. 16 14 12 10 Data protection Climate 8 6 HK has implemented HK’s temperature 4 The Personal Data ranges between 10 2 (Privacy) Ordinance and 35 degrees Celsius. 0

to protect personal Moreover, HK is year per Minutes data collection. This located in a zone with attracts demand low risk of natural from mainland firms calamities such as emphasizing the earthquakes and internationalisation tornadoes. of their service. Source: CLP Holdings 2018 Sustainability Report (page 114). Note: 2016-2018 average for CLP Power was 10.3 minutes, but 8.9 minutes Source: Ookla Speedtest, Office of the Government Chief Information Officer was due to the impact of typhoon Mangkhut, otherwise the three-year 8,9 CLP Information Kit; 10 Office of the Communications Authority; 11 Ookla, Speedtest Global Index, as of January 2020 average would be 1.4 minutes. Figures for other cities are the average in 2015-2017. 8 COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

WELL ESTABLISHED INTERNET Capacity of external telecommunications facilities (activated cable) 80,000 INFRASTRUCTURE 60,000 By January 2019, Hong Kong was linked to the internet through 11 40,000 submarine cables12, increasing from six in 2012. As a major regional telecommunications hub, Hong Kong has robust data centre demand from 20,000

telecom companies and enterprises. 0 Gigabit per second per Gigabit

Hong Kong has eight cable landing stations, located in Tseung Kwan O, Deep

Sep-15 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-16 Sep-17 Sep-18 Sep-19

Water Bay, Chung Hom Kok, Cape D’Aguilar, and Tong Fuk. As development Sep-05

Mar-12 Mar-19 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 sites for data centres are limited in most of these areas except Tseung Kwan O, demand from submarine cable and telecommunications operators for Source: Office of the Communications Authority high-tier* data centres and has increased along with demand from their end- users, enterprises and telecommunications customers. Data centres: The missing puzzle Despite the well-established internet infrastructure and the rising demand for Hong Kong, locations of cable landing stations and cable names data centres, data centre supply and capacity, one of major factors in MNCs’ Cable Landing Stations location strategy, has been lacking.

Data Centre Clusters Tai Po Due to a shortage of land, the government has prioritised residential land for development. However, the commercial land supply has also been increased Shatin recently with the development of CBD2 in Kowloon. Land for data centres has Tsuen Wan & been limited in government land sale programmes. Over the past 10 years, the Tsing Yi 13 Tsueng Tsueng Kwan O government only sold two data centre sites , which were both acquired by EAC-C2C Kwan O SUNeVision, the largest data centre operator in Hong Kong. Kowloon Bay APG HK-G Lantau Island ASE/Chaya Malaysia AAG Central APCN-2 Chai Wan FEA Aberdeen Cape D’Aguilar Deep Water Bay AAE-1 Tong Fuk SeeMeWe-3 Cloud computing/ Telecom infrastructure Data centre FLAG/REACH NAL Chung Hom Kok TGN-IA EAC-C2C IoT/ e-commerce PLCN SJC Landing stations and telecom cables within and Servers with HK-A The source of appropriate security SJC-2 demand for across regions; to connect BTOBE between end-users and and backup equipment data centres data centres that stores, manages Source: Data Centre Facilitation Unit and disseminates data

12 Landing of Submarine Cables in Hong Kong, OFCA 13 *Data centres are classified into four tiers in general, the higher tier the better performance. Please see Increasing Established Insufficient Data Center Site Infrastructure Tier Standard: Topology by Uptime Institute for more details. 9 COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

HIGH-TIER DATA CENTRE REQUIREMENTS Adequate space Must be in Industrial (I), Distance away Sufficient distance for cooling Commercial (C) or Other from petrol from any other infrastructure, Specified Uses stations and hazardous transformers and (Business) oil depots businesses petrol or gas (OUB) zone* or goods storage

MARKET ENTRY STRATEGY - GOVERNMENT SUPPORTIVE MEASURES There are three main types of data centre incentives in Hong Kong, which are detailed in the Measures to Facilitate the Development of Data Centres, promulgated by the Office of the Government Chief Information Officer (OGCIO). Investors and data centre operators in Hong Kong can leverage the measures that allow the redevelopment or conversion, in whole or in part, of industrial buildings into data centres.

Land acquisition – government land sales for data centres Wholesale conversion – > Acquire government sites from land Lease modification – change in use of parts of sale programme that are allowed to be redevelopment to high-tier existing industrial buildings developed for data centre use data centres

> No fee for waiving any conditions > The data centre portion of the through the change of use redevelopment should be at least: > The data centre conversion must take place in an existing industrial building – 40% of the maximum permissible which is 15 years or older development GFA or, > The proposed building must be in – a plot ratio of 2.5, whichever is higher – Industrial (I), > For the data centre component, the land premium** assessed based on high-tier – Commercial (C) or data centre use – Other Specified Uses > The redevelopment must take place on (Business) (OUB) zones Industrial buildings into an Industrial lot data centres

Source: Developing Data Centres in Hong Kong. *See also: Lease Modification for Development of High-tier Data Centre on an Industrial Lot. **Developers are charged the land premium when they apply for rezoning their lands to other land use. 10 COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

CURRENT DATA CENTRE TREND Geographical distribution of data centres in Hong Kong (%) Data centres clusters mainly in the New Territories Currently, there are around 8 million sq feet (743,224 sq meter) of data centre facilities in Hong Kong, with more than half (56%) of them located in Tseung Kwan O. Most high-quality and sophisticated Tier IV14 data centres are also clustering in Tseung Kwan O Industrial Estate. Given the scarcity of the new data centre plots in the government land sale market, prices for data Kwai Chung & Shatin, centre sites have been growing rapidly over the last few years. The average Tai Po & Tsuen Wan land prices for the last two high-tier data centre plots, both in Tseung Kwan O Fanling Industrial Estate, have vastly expanded by five times, from HKD904 (USD116) per sq feet in 2013, to HKD4,500 (USD577) per sq feet in 2018. Meanwhile, Kowloon Kwai Chung and Tsuen Wan secured the second-largest (21%) data centre Tseung Kwan O cluster, according to our data. Local operators dominate the market Due to the nature of high barriers to entry and long repayment-period, data centre remained a niche sector in Hong Kong. The requirement of sophisticated technologies and facilities, and the substantial development cost involved may have sidelined some small and individual investors to explore opportunities in other asset type. According to Colliers’ estimate, the top five data centre operators already accounted for over half of the market shares (in terms of data centre floor area) in Hong Kong, with key players including SUNeVision, PCCW Solutions, NTT Communications, China Unicom and Telehouse. Government policies in support of data centres Tseung Kwan O 56% Apart from the aforementioned incentive measure discussed on page 10 in Kwai Chung & Tsuen Wan this report, the government also announced in the latest 2020-21 Budget 21% Speech, the scheduled completion of the 290,700 sq feet (27,000 sq meter) Shatin, Tai Po & Fanling Data Technology Hub15 in Tseung Kwan O Industrial Estate by H1 2020. Developed by Hong Kong Science and Technology Park, the facility should be 11% focusing to support data technology, information, and telecommunications, Hong Kong Island including services to support data centre and disaster recovery plans. 9% Meanwhile, the government also plans to launch Smart City Blueprint for Kowloon Hong Kong 2.0 in 2020 to further promote smart city development. 3%

14 Tier IV defines as facility events affecting the computer room are empirically reduced to 0.8 hours on an Source: Companies, Colliers International annual basis. Tier IV sites consistently demonstrate 99.99% availability. 11 15 and Technology Corporation COLLIERS RADAR DATA CENTRE | RESEARCH | HONG KONG | 8 APRIL 2020

THE FUTURE LANDSCAPE Hong Kong data centre supply, 2018-2022 (million sq feet) Million sq feet New supply 12 Total stock to increase steadily through 2022 9.9 10 9.1 We estimate future supply to grow steadily at an average rate of 7% YOY 7.8 8.0 8.5 over the three-year period between 2020 and 2022. New supply is scheduled 8 predominately in the New Territories. Looking ahead in 2020, one notable 6 new data centre is Hon Kwok Group’s project in Kwai Chung’s Kin Cheun 4 Street16, which brings another 228,000 sq feet (22,200 sq metre) of data centre supply to the city. The supply pipeline is concentrated around 2 SUNeVision PCCW and Equinix, who continue expanding. 0 2018 2019 2020 E 2021 E 2022 E Increasing cloud services and 5G implementation Source: Colliers International Whilst Hong Kong is moving towards greater adoption of cloud services and Hong Kong, map of select key occupiers by submarket the roll-out of the 5G network will likely increase data centre demand. Adequate data centre hardware is needed to support the growing demand Tsuen Wan & Kwai Chung while catering to the fast-growing technology sector. • Grand Ming & Group Holdings Shatin, Tai Po & Fanling • Equinix • SUNeVision Greater diversity of locations and options are needed • PCCW Solutions • PCCW Solutions • NTT Communications

Data centre occupiers are looking for greater geographic diversity. For Tai Po instance, data-heavy industries such as banking, finance, and TMT may prefer Kowloon East to have data centres situated closed to their head offices on Hong Kong • SunnyVision Limited • New World Island. However, less than 10% of Hong Kong’s data centres are on the Telecommunications Limited island. Areas such as Wong Chuk Hang, Quarry Bay and Chai Wan are suitable Tsuen Wan • OneAs1a Shatin for industrial conversions to data centres. Kwai Tsing Green and sustainable data centre comes to the fore Tseung Kwan O Kowloon • HSBC East Data centres are energy-intensive and providing all that power can be bad Tseung • SUNeVision Kwan O 17 • China Unicom for the environment. In response, data centre operators such as Equinix Island South • KDDI/HKCOLO has adopted renewables-centric practices by sourcing 90% of their electricity • HGC Global Centre Island • Global Switch sustainably, and they are on a committed path to achieve 100% clean and Limited East • CITIC Telecom Island South renewable energy. Many data centre operators are increasingly abiding by Island East 18 • PCCW Solutions the UN2030 sustainability agenda and Environmental, Social, and • SUNeVision Governance (ESG) principles, where profitability and sustainability are no • HKCOLO longer perceived as a competing interest.

16 S&P Global Market Intelligence; 17 Equinix, 18 United Nations Sustainable Development Source: Colliers International, Cloudscene

12 Primary Authors: For further information, please contact:

Rosanna Tang Nigel Smith Head of Research | Hong Kong SAR and Southern China Managing Director | Hong Kong SAR +852 2822 0514 +852 2822 0508 [email protected] [email protected]

Anthony Wong Andrew Haskins Assistant Manager | Research | Hong Kong SAR Executive Director | Research | Asia +852 2822 0588 +852 2822 0511 [email protected] [email protected]

Hannah Jeong Head of Valuation and Advisory Services | Hong Kong SAR +852 2822 0589 [email protected]

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Copyright © 2020 Colliers International The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.