Keen bidding likely for Hong Kong site to be developed as a data centre

Tseung Kwan O plot is designed to be developed as a service centre and is up for tender in June

PUBLISHED : Wednesday, 22 May, 2013, 12:00am
UPDATED : Wednesday, 22 May, 2013, 3:51am

A site earmarked for development into a data centre in Tseung Kwan O - and up for tender next month - is expected to attract keen bidding interest as there is a shortage of such service centres in the city, say property agents.

"Market demand for data centres is very strong, and their development is attractive to investors who are looking for high rental yields and long-term investment," said Reggie Lai Yui-chung, project planning manager at Billion Development, a developer that focuses on office and industrial buildings.

"Average rents at Exchange Square in Central are currently about HK$150 per sq ft. But rents in a data centre in Tseung Kwan O could reach about HK$300 per sq ft," he said.

The Lands Department will release a 1.08 hectare site at Wan Po Road in Tseung Kwan O Industrial Estate for tender next month. It will be the first government tender of a site specified for development into a data centre, although Google already has a site under construction in the area. Several other companies, including HSBC and Japanese telecom giant NTT, already operate data centres there.

Alvan Chan, a director at Midland IC&I's industrial department, said the number of tenants seeking space in data centres had been increasing and the release of the site was welcome.

"Supply is very tight. It is very difficult to find space in a data centre available for lease, and it is difficult to convert existing industrial buildings to data centre development as they have a higher requirement on the facilities of the building."

Ideally a building meant for data centre development had to be tailor-made for the purpose, he said.

Local developers were reluctant to build such single-purpose centres and chose to build office buildings instead. "So if any property becomes available for the use of a data centre, it would be taken up very soon," he said.

Despite the strong demand for data centres and expectation of keen interest for the Tseung Kwan O site, Billion Development's Lai said his company would not be a bidder because it was not a long-term investor.

In addition there were considerable technical challenges to developing a data centre. "Two major challenges are meeting the requirements of the fire safety ordinance and getting approval from a power company to increase the electricity service."

A data centre must have a 24-hour air-conditioning and secondary back-up mains electricity supply from two sub-stations, said Lai. The floor-to-floor height specification is higher than that for an office building and floor slabs must also be thickened.