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The demand for data centres has fallen for the past two years and prospects look grim, according to analysts.

They said the global economic downturn and the shrinking telecommunications and e-commerce sectors had dampened interest.

This was a disincentive to Hong Kong developers converting under-utilised industrial buildings into data centres or other commercial uses.

They said the Government's move to provide more flexibility in land use of industrial sites, could not stimulate much interest.

Data centres are dedicated to storage and management of servers and equipment for retrieving large amounts of electronic data for e-commerce, Internet applications and information technology operations.

The falling demand for data centres was evident in the case of the Global Gateway industrial building in Tsuen Wan.

About 500,000 square feet of floor area in the building will remain for industrial or warehouse use instead of being converted into data-centre use.

The 1.2 million sq ft building at 168 Yeung Uk Road, formerly known as the Winsor Centre, was partly acquired by Morgan Stanley Dean Witter and Pioneer Global Group in 2000 from Winsor Properties Holdings. The consortium had planned to turn it into one of the largest data centres in Hong Kong.

The transaction raised hopes for the SAR's surplus industrial sites and also set a trend for developers to convert industrial properties into data centres.

Winsor Properties executive director Lam Woon-bun said the United States-based consortium had taken about 700,000 sq ft of floor area in the building in the past two years as part of the conditions of the full transaction.

But the consortium did not exercise its right to take the remaining 500,000 sq ft on the first floor to the 11th floor when its options expired at the end of last year, he said.

Winsor Properties recently sold a 16,660 sq ft area on the sixth floor to a local investor for warehouse use. Mr Lam said it planned to lease the remaining floor area for industrial or warehouse use.

Analysts said the building could not compete with major data-centre operators in the area due to the multiple ownership and the varying uses of the building.

One of the major data-centre players in Tsuen Wan is Sunevision Holdings, which operates its Jumbo-iAdvantage, comprising about 150,000 sq ft.

Its data-centre portfolio also includes a 350,000 sq ft Mega-iAdvantage in Chai Wan and a 20,000 sq ft One-iAdvantage in Kwun Tong.

Simon Lo Wing-fai, research manager of Colliers Jardine, said demand for data centres had dropped significantly in the past two years due to weak economic conditions worldwide.

The trend for converting surplus industrial buildings into data centres also has faded in the past two years following the consolidation of information and technology businesses, he said.

Henderson Land Development was aggressive two years ago in securing government approval for converting some of its old industrial sites into data centres.

It has a land bank for data-centre development of about 800,000 sq ft. It secured Town Planning Board approval for a proposed 258,000 sq ft data centre in Big Star Centre in Kowloon Bay, a 215,000 sq ft centre in San Po Kong and a 114,300 sq ft centre in Joseph Yen Industrial Building in Chai Wan.

DTZ Debenham Tie Leung research director Alva To said because of the sagging economy times would be tought for surplus industrial buildings. Many landowners had become cautious about converting their buildings for data-centre or office use.



Data centres the faded hope for idle buildings