Data centers seen to expand in Philippines

MANILA, Philippines — Fitch Solutions Country Risk & Industry Research expects a significant investment into digital infrastructure and data center development in the Philippines and the rest of Southeast Asia as digitalization gather pace amid the impact of the pandemic.

In a commentary titled “Southeast Asia to See Rapid Rise in Data Center Construction,” Fitch Solutions said the region may become one of the fastest growing data center hubs globally.

“While the pandemic has posted some near-term headwinds to the construction of traditional infrastructure and buildings, construction of data centers has continued to grow,” it said.

The research arm of the Fitch Group believes the pandemic has accelerated the momentum for digital transformation due to increased demand for cloud-based services and solutions, such as those to support remote teams and e-commerce, and use of automation to reduce on-site manpower.

While Singapore is expected to remain the key regional data center hub over the coming years due to its attractive operating environment, Fitch Solutions said markets like the Philippines, Indonesia, Vietnam, Thailand and Malaysia show strong potential for growth.

“Concurrently, Singapore will also face increased competition from regional neighbors as more incentives and initiatives to attract foreign investments are introduced,” it said.

Fitch Solutions cited increasing regulatory support, government-driven initiatives, rapidly rising investor interests for data center projects in the Philippines and other countries in Southeast Asia.

It pointed out increasing expectations for environmental sustainability in data center construction would drive new innovations in building designs and other system installations, favoring markets with cleaner energy and utilities profiles, and stronger support for green alternatives over the much longer term.

“We note that this also comes alongside the rising expectations for environmental sustainability in data center construction and management, particularly as data centers consume a large amount of power,” Fitch Solutions said.

According to Fitch Solutions, many large companies, including technology giants, have announced corporate goals to achieve net-zero emissions that would drive demand for greener data centers.

“This could come in the form of more efficient cooling technologies and systems, which reduce water and energy consumption or in data center infrastructure management tools such as energy monitoring sensors to manage operational efficiencies,” it said.

It explained an increasing number of data centers also have solar installations and more efficient turbine generators within their facilities to procure cleaner energy sources.

Alternatively, some companies have built their data centers with a direct power purchase agreement with an external renewables project developer.

“We believe that markets with a cleaner energy and utilities profile and/or stronger support for green alternatives across the broader sector will stand an advantage over the much longer term,” Fitch Solutions said.