Developers are capitalising, at considerable expense, on the rapid growth of e-commerce business by converting their under-utilised industrial buildings into data centres. Data centres, which store and manage servers for companies engaged in e-commerce, require highly secure facilities, diverse network connectivity, high bandwidth, reliability and immediate support provided by experienced service personnel. Operators are charging as low as HK$2,000 per month per rack, depending on the rack space and services customers require. Growing demand for server co-location services provide an alternative market for the sluggish industrial property sector. To enhance the commercial value of industrial buildings developers such as Sun Hung Kai Properties (SHKP) and Henderson Land Development are upgrading their buildings to generate better investment returns. Developers are setting aside considerable capital to equip industrial buildings with fibre optics to provide high-speed Internet connection, 24-hour uninterrupted server operation and advanced power back-up for their customers. Security systems must include anti-hacker firewall technology, the latest anti-virus programs and round-the-clock security guard patrols to prevent unauthorised entry. SHKP's technology arm Sunevision Holdings has set aside an initial HK$2.17 billion to cover data centre expansion in the region through to next year, while Henderson Land intends to use HK$300 million to upgrade three industrial buildings into data centres. Morgan Stanley Real Estate Fund and Pioneer Industries also plan to turn their recently acquired 1.24 million-square-foot Winsor Centre in Tsuen Wan into Hong Kong's largest data centre. Cable & Wireless HKT has a HK$1 billion expansion plan in the sector. Cushman & Wakefield director Simon Chow said monthly rentals for poor-quality industrial buildings were as low as HK$1.50 to HK$2 per sq ft. Monthly charges for co-location services would certainly be better than industrial rentals. The commercial value of industrial buildings catering for data centres would also be boosted, he said. Alex Tam, chief executive of Sunevision's subsidiary iAdvantage, which operates data centres, said the company's huge capital commitment in the sector indicated the considerable market potential. Space at its first 20,000 sq ft facility in Kwun Tong had been fully let since March, he said. Negotiations with various corporations to take up space at its second 150,000 sq ft data centre, Jumbo iAdvantage, in Tsuen Wan, were under way, Mr Tam said. To attract small to medium-sized companies, iAdvantage was offering an entry-level package as low as HK$2,500 per month per rack for e-commerce business, he said. By the end of the year, iAdvantage would open its third 350,000 sq ft Mega Advantage facility in Chai Wan, he said. HKT is stepping up efforts to expand the space occupied by its Hong Kong data centres to 700,000 sq ft, from 300,000 sq ft by 2002, either through upgrading existing exchange buildings or leasing industrial space. The telecommunications operator recently opened its sixth 80,000 sq ft data service centre in Somerset House, Quarry Bay. HKT data centre services director Joseph Ma said: 'We have been doing [this] business for quite some time,' adding that demand had grown over the past 12 months. HKT is offering monthly rates, including basic co-location services, as low as HK$2,000 for a quarter rack to HK$6,000 for a full cabinet. Targeted customers were application service providers and small to large enterprises engaged in e-business, Mr Ma said. Mr Tam said developers would prefer to offer better-quality services to lure potential clients instead of undercutting prices. Most clients, especially major corporations, were more concerned about facility services than lower monthly charges. Mr Tam said data centres required specific features, such as dual access for bandwidth transmission and advanced power systems. Location was no longer the priority of customers because their daily operations would not be in the data centres. For security reasons, customers preferred to have their servers in buildings that catered mainly for server co-location services rather than share space with other office tenants in a commercial building, he said. William Lo, chairman and chief executive of Netalone.com, which is leasing rack facilities at SHKP's Millennium City in Kwun Tong, said users would benefit if more data centre services were available. He said the company planned to double its space to meet business growth. Mr Ma said HKT launched Hong Kong's first 'iris recognition system' at its sixth centre for better access control to critical facilities. It also used bullet-proof glass to enhance security and anti-hacker firewall technology to prevent unauthorised access, he said.