Knowledge Hub

Knight Frank, in its latest report titled “Singapore Residential Q3 2020 Transaction Volume Rebounded in Q3 Due to Pent-up Demand” highlighted the positive outlook that lies ahead for Singapore’s residential market. Some of the key perspectives include:

• Prices of non-landed private residential properties (excluding ECs) defied recessionary fears, holding flat at 148.7 in Q3 2020** after rising by 0.4% in the second quarter of the year. Transaction volumes of non-landed residential properties (excluding ECs) more than doubled from the previous quarter, recording 5,895 units in Q3 2020*.
• Pent-up demand from buyers who deferred their purchases coupled with low interest-rates drove the pick-up in sales momentum from both needs-based buyers and those who feared that prices might increase in the near-term.
• The resale market also rebounded in Q3 on the heels of the new sale market. A total of 2,480 units were transacted in the secondary market, more than three times the 758 resale units sold last quarter*. More resale transactions were completed as in-person viewings resumed in Phase 2 and owners grew more confident in allowing viewings with falling COVID-19 cases.

Data Centers are instrumental to the successful development of our pillar industries, being integral to the efficient operation of financial, trading and logistics services in Hong Kong. With rapid development of global telecommunications and the growing emphasis on technological advancement for daily convenience, the demand for high-tier data center services from users like of “cloud computing”, “E-commerce” and “high-frequency trading” has never been greater in Hong Kong. According to the LegCo paper in December 2013, the government had originally reserved three sites in Tseung Kwan O for building Data Centers. After the first site was sold, the remaining two adjoining sites were consolidated into one. All the three sites designated for data center uses are eventually acquired by the same data center operator. The market interest on industrial land remains very keen; as witnessed by the record transaction price in the recent sale by the government of an industrial land in Shatin, which was purchased through public tender by the world’s largest wireless network operator, China Mobile. The fierce competition among developers and other tenderers for this lot has justified government alarm over the shortage of Data Centers and the urgency to raise the supply of land for them.

Amid the ongoing expansion of Data Center services in Hong Kong, it is clear that the government is unable to meet the ever-rising demand in provision of land. While many operators might not need an entire Data Center block, there exists substantial demand for small-scale cloud-calculation Data Centers. In 2012, the government introduced a policy to promote the conversion of industrial buildings to Data Center use. The waiver fee for changing parts of industrial building aged 15 years or above into Data Centre use first is exempted. The exemption is applicable to Data Centre of all tiers. Since the conversion of industrial buildings into Data Centers drastically reduces development costs, landlords of old industrial assets would have more incentive to revitalize and covert their buildings into higher value-added Data Centers. It is therefore reasonable to infer that this new government policy will greatly stimulate the supply of small-scale Data Centers, helping to meet the demand of multiple businesses.

Indisputably, if Hong Kong aims to become an international Data Center hub in APAC, the provisions of suitable land plots supported by well-developed infrastructure and facilities are of utmost importance. World tech behemoths Google and Facebook had considered setting up data centers in Hong Kong but eventually abandoned their plans in 2013 and 2018 respectively. Google’s official explanation at that time was the paucity of land for future expansion. Eventually, Google picked a site in Taiwan’s Changhua County as the new location of its Data Center – five times larger than the original one in Tseung Kwan O, Hong Kong. Currently, Google is running two Data Centers in Asia, one in Taiwan and the other in Singapore. These sites are chosen because of multifaceted factors like attractive land prices, comparatively low energy costs and the geographical proximity to its Asia-Pacific Headquarters. In addition, the utilization of renewable energy is one of the Google’s top priorities. In 2012, Google announced its renewable energy use target to be 100%, maximizing the use of clean energy sources for generating electricity. In stark contrast, Hong Kong produces just 3 % of total electricity demand from renewable energy sources which, as identified by the Hong Kong Electrical and Mechanical Services Department, would go against the “green philosophy” valued by Google. Limited space for further expansion, less-developed renewable energy supplies and a tepid response from the local government have seemingly restrained Hong Kong’s Data Center and high-tech industry development.

Apart from land resources, other ancillary facilities and human resources are also fundamental for Hong Kong to tackle in striving to be an Asia-Pacific Data Center hub. There are some prerequisites for a premise to be suitable for use as a Data Center, such as high ceiling height, flexible floor layout, a standardized fire system and sufficient spaces for the installation of supporting equipment (transformer rooms, backup generators, etc.). It is highly suggested that different government departments, inter alia the Lands Department and the Buildings Department, should provide and update proper guidelines in a timely manner to expedite the application procedures by the owners or their APs. The goal of becoming a successful Data Center hub in the Asia-Pacific region, cannot be achieved without the government’s support and favorable policy to ensure our competitiveness against other cities in the region.