Ease rules to push data centres, analysts say
Relaxing regulations regarding the use of transport depots, power substations, and telephone exchange buildings will be the fastest way to release sites for data centre developments, property analysts say.
The government has identified data centres, which are used to house computers and related facilities, as growth opportunities for the city, and included in this month's budget were two measures aimed at encouraging their development.
One was a lower land premium levy for the redevelopment of industrial buildings into data centres, and another was scrapping the standard waiver fee for converting parts of industrial buildings aged 15 years or more into data centres.
Patrick Wong, a director at Centaline Commercial, doubted whether the measures would encourage data centre development.
'Data centres require higher building standards such as floor loading specifications, for instance. Excluding support facilities, the construction cost of a data centre works out at about HK$1,500 per square foot compared to HK$1,200 per sq ft for an industrial building,' he said.
Rental income for data centres, however, is slightly higher than that of industrial buildings - at a little under HK$15 per sq ft on Hong Kong Island and about HK$10 per sq ft in Sha Tin; compared with warehouse rents of some HK$8 to HK$9 per sq ft.
'Even if data centre vendors planned to convert industrial buildings they would still face higher construction costs and complicated construction work,' Wong said. This is because data centres need a floor-to-ceiling clearance of at least four metres, a floor loading of 200 to 250 pounds per sq ft, and 380 volt direct electricity supply.
'In some industrial buildings it may be necessary to merge two storeys into one in order to meet the higher floor loading requirement of a data centre. That means lettable area would be cut.'
Given these complications it could take three to four years before the budget measures led to new data centres being released onto the market, said Wong.
Alnwick Chan Chi-hing, of consultancy Knight Frank, suggested the government should allow transport depots, power substations, and telephone exchange buildings to be used as data centres.
'That would allow faster developments of data centres since these kinds of buildings are suited to conversion. For instance the floor to ceiling clearance of transport depots is high enough to accommodate the needs of data centres.'
Chan says there are 21 power substations, 12 transport depots, and 24 telephone exchange buildings in the city, and more than half are in Kowloon and on Hong Kong Island.
'There are surplus areas in telephone exchange buildings that may be available for conversion. Also, the sites of power substation have not yet been fully-utilised,' he added. 'Most are accessible and located in urban areas and will not need extra infrastructure facilities or reclamation.'
Wong says there are only a few data centres in Hong Kong, mainly in Tsuen Wan and Sha Tin.
'There is demand for more data centres and converting existing substations and telephone exchange buildings will be the quickest way to satisfying that demand,' he said.