Malaysia’s DC industry stands tall

THE data centre (DC) industry in Malaysia is rapidly evolving, driven by surging digital demand, strategic investments and its emergence as a key player in the cloud ecosystem.

In recent years, the fast-moving industry here has transformed from a regional player into one of South-East Asia’s most dynamic data centre hubs.

It’s worth noting that we have quickly become an alternative hub to Singapore – as of March this year, Malaysia approved a total of RM144bil in investment projects for the industry.

Renowned technology companies like Microsoft and Google are among the key investors, but can the country manage energy, sustainability and policy changes carefully?

Principal Asset Management Bhd chief executive officer Munirah Khairuddin talks to StarBiz 7 about Malaysia’s unique advantages in the industry, and how it differs from Europe and the United States.

“In Europe, one looks for power rights first, and in the United States, land is most important,” she says.

“In Malaysia, if we look at locations like Penang, it fuels the whole country and for Johor, its capacity extends to Singapore.”

According to Munirah, access to water is equally important, but rarely talked about.

Natural resources are plentiful in Malaysia, and states like Sarawak are beginning to look very attractive because of their hydropower capabilities.

“Malaysia is definitely doing the right thing, all its building blocks are in place.

“I think the next wave which is still nascent is on the artificial intelligence (AI) side,” she adds.

“The data centres that have been around have been more on the traditional cloud space, but this is only just scratching the surface of generative AI.”

Within the region, Munirah believes Malaysia is still ahead of most other countries. Singapore, however, is above us but she reckons the republic has a challenge when it comes to capacity.

“The great thing about Singapore is, because it is quite a vibrant market, exit strategies for data centres and fund managers are quite good,” she says.

“We’ve seen successful funds go into real estate investment trusts (REITs).”

Additionally, Munirah would like to see the same in Malaysia too at some point.

“Right now, what we see is more multinational hyperscaler buildings, and yes, it creates jobs but it would be interesting to see how it could dovetail into capital markets like REITs,” she opines.

She says likewise, there are opportunities for infrastructure developments to turn into the liquid public capital markets.

Europe’s data centre edge

Europe’s data centre industry is also at a pivotal stage, shaped by strong regulatory frameworks, growing sustainability demands and the need to support an increasingly digital economy.

With major markets like Frankfurt, London, Amsterdam, Paris and Dublin leading the charge, Europe is balancing rapid expansion with stricter environmental policies, pushing operators to innovate in energy efficiency and green technologies.

At the moment, data centres in the United States and in Europe are leading the trends that shape global standards.

Principal Asset Management senior fund manager Sebastian Dooley says occupational trends tend to hit the United States first, and enter the European market 18 to 24 months later.

Dooley, who is based in the United States, has had experience in the management of numerous data centres across the United States and Europe.

Dooley says Europe, however, is becoming increasingly constricted in terms of being able to develop new assets due to power and land.

“Power costs more in Europe than in the United States, that’s why we see a huge amount of solar power being created there.

“And with less available land, there are limits on how much can be built. Every year we see an increased number of leases to properties being signed,” he says.

Another area which has slowly been gaining traction in the region is the idea of sovereignty.

Dooley says a lot of European countries have always been very protective over their citizens’ data, and if AI is added into that mix, that data is now worth plenty of money.

“We’re seeing that sovereign approach strengthen and groups wanting to keep European data within its borders,” he explains.

Countries like France are trying to encourage more capital and policies so it becomes more of a powerhouse, whereas Germany, Switzerland and the United Kingdom are also formulating their own methods.”

On upcoming locations for data centres, Dooley says Milan and Madrid have seen some interest while Berlin is emerging as a spinoff market from Frankfurt.

Interestingly enough, Dooley says the DC industry in Asia-Pacific is larger than in Europe.

He reckons established markets like Singapore, Hong Kong and even Australia are well poised to become even stronger.

“Some of the key drivers include the eCommerce phenomenon, and the demand for cloud.

“With AI on the scene as well, we’ll see more of this as more companies move data around.

“Then there’s generative AI that can really help increase productivity and grow economies.”

Dooley reckons the DC space is one to watch because things are changing so rapidly today, and clearly, there are no signs of slowing down.