The biggest and last remaining land parcel for a data centre ever to be sold via tender by the Hong Kong government has received nine bids, but markets observers say more needs to be done to realise its dream of becoming a smart city. The bidders for the 295,405 square foot plot, in Tseung Kwan O’s Wan Po Road, which closed on Friday, include Sino Land, Grand Ming Group, Far East Consortium International, Goodman Group and Hong Kong-based data centre operator Oneasia Network. Colliers estimated the parcel to be worth up to HK$3.75 billion, or HK$3,100 per sq ft, and expects the development cost at between HK$3,000 per sq ft to HK$3,500 per sq ft. “The fact that it fetched nine bids from major operators matched our expectations,” said Hannah Jeong, head of valuation and advisory at Colliers. “As the scale of the site is very big, not everyone could join the game, especially smaller developers and individual investors with limited budgets.” She said that land in Hong Kong is costly compared to countries like Singapore, adding that the government should allocate cheaper land in the remote areas of New Territories for data centres and offer other financial incentives. WHY FACEBOOK BET US$1 BILLION ON SINGAPORE DATA CENTRE She said Facebook built a 4 million sq ft data centre in Singapore because the government gave the land almost for free. According to Colliers, Hong Kong currently has about 8.2 million sq ft of data centre supply and this site will add another 1.21 million sq ft. “It is not a very significant increase compared to the growing demand in Hong Kong and Asia,” she said. “While this site is good enough to support immediate demand, Hong Kong needs cheaper options for data centre usage and government support to achieve its long-term goal as a data centre hub and smart city.” Colliers also noted that under the current rental level of HK$20 (US$2.5) to HK$25 per sq ft a month with annual increase of 3 per cent, data centre user face a continuous compression in margins because of increasing costs in Hong Kong. Hong Kong’s largest data centre is now live with China Telecom Global as its first client But it also noted that data centre demand will continue to grow in the next decade as more cables connect Hong Kong because of its strategic location. Google and Facebook said in January that they were jointly laying 13,000km of submarine cables between Los Angeles and Hong Kong. As a result Jeong said she expects major operators such as Grand Ming to submit higher bids compared to other investors, as this fits in their long-term business plans. Bidders too were optimistic about the market prospects. Katherine Tsang Ka-man, project manager at Grand Ming, which operates two data centres in Hong Kong, said that based on the rental business now, she believes there is a good opportunity here. Far East also said it was “optimistic” on the data centre market outlook.