Malaysia to take lead in data centres: Q3 2024 report by Juwai IQI 

• Malaysia's strong economy has driven demand in the data centre industry
• Country’s market outlook excels in SEA due to ample power, skilled workforce

[Editor's note: Paragraph updated for clarity]

In the third quarter of 2024, Malaysia became the fastest-growing data centre market in the industry’s fastest-growing region, according to new insights released by global real estate and proptech firm Juwai IQI.

“Malaysia is transforming itself from an also-ran to a top contender in data centres so quickly that they are calling Malaysia a data centre powerhouse,” said Juwai IQI co-Founder and Group CEO Kashif Ansari. “If all the region’s planned new data centres come online, Malaysia will be Asia’s third biggest market, behind only Japan and India. That will create tens of thousands of skilled local jobs,” he added.

Global Trends

According to Ansari, the global data centre industry is growing quickly this year because of demand from artificial intelligence (AI), machine learning, e-commerce, and cloud computing. “All four sectors are significant users of data centre computational power. Their rapid growth has led to the expansion of hyperscale data centres. The largest example of these massive facilities is as big as Vatican City - that’s about the size of 75 football fields. By contrast, a typical medium-colocation data centre is only about 10,000 m² in size. That is equivalent to about two football fields,” he added.

“Data centres use so much power that AI electricity consumption will likely account for half a percent of all global electricity consumption within two and a half years, and it will only keep growing. AI’s need for computational power is doubling roughly every 100 days. The demand for power is so great that power availability has become a significant constraint on data centre growth in every major market, from Singapore to Virginia. Developers are responding by building new data centres near existing power plants or by constructing new power plants alongside their new data centre projects,” Ansari said.

Malaysia’s Fast Growth

“Now let’s look at why the data centre industry is growing so quickly in Malaysia. The country is Southeast Asia’s most rapidly growing data centre market - its strategic location, favourable government policies, proximity to Singapore, and attractively priced land, power, and water are behind this growth. In Malaysia, the data centre market development pipeline consists of 1.2 GW, which represents 600% growth over the next five years,” Ansari said.

Major cloud service providers such as Amazon Web Services (AWS), Microsoft, Nvidia, and Google have recognised Malaysia's attractive market. All have committed to making significant investments here. Additionally, Malaysia's robust economic performance has helped boost demand in the data centre industry.

The country's GDP growth rate has been consistently high by global standards. At the same time, the country has transformed its economy from a dependency on raw material exports into a diversified economy with a large services sector. Services now make up more than half of GDP, the report highlighted.

It added that along with the strong economy, the Malaysian data centre market also benefits from government policy support. The government has offered tax incentives, grants, and regulatory support to attract data centre investments.

Additionally, the Malaysian Investment Development Authority and Malaysia Digital Economy Corporation have established a single point of governmental contact for investors to facilitate digital investments. They have also created the Green Lane Pathway to enable new data centres to obtain power in as little as 12 months.

The report states that another manifestation of a far-sighted government is the existence in Malaysia of a highly developed telecommunications infrastructure. This ensures high-speed internet connectivity and low latency, both essential for data centre operations.

Data centres deserve government support because they generate significant employment, the study highlighted, adding that there is direct employment in the data centres themselves, as well as a large number of external staff and employees at customers and suppliers. The construction of data centres is also labour-intensive and a single hyperscale data centre can even take more than five years to build and have more than 1,000 employees on-site every day.

Malaysia’s Key Market Metrics

Data centre power capacity is measured in megawatts (MW) and all the data centres in Malaysia together have the power to keep 280 megawatts of computers running all the time. According to the report, other data centres are already under construction, about to start construction, or in the planning stages. In total, the live capacity and the under-construction and planned capacity equal 3,221 MW.

It highlights that: 

• Total Live Capacity: 280 MW 

• Total Under Construction Capacity: 159 MW 

• Total Committed Capacity: 766 MW 

• Total Early-Stage Capacity: 2,016 MW

Key players in the Malaysian data centre market include NTT Global Data Centres, AWS, Microsoft, Google, and local firms such as TIME dotCom and Bridge Data Centres. Early-stage planned construction of new data centres is almost entirely focused on Greater Kuala Lumpur and Johor, with about 55% of new projects planned for the KL area, and the other 45% for Johor.

The Greater Kuala Lumpur region, which includes Cyberjaya, has a strategic location, robust infrastructure, and government support. Some benefits of Cyberjaya are its competitively priced land and stable power supply, as well as the presence of major cloud providers in the region.

The report notes that Johor is the fastest-growing market in Southeast Asia, driven by spillover demand from Singapore. Besides proximity to the city-state, key factors contributing to Johor's emergence include the ample available land and reliable power supply.

2030 Forecast & Outlook

According to the report, the Malaysian data centre market will continue to grow rapidly throughout the rest of the decade. With more than 3 GW (3,000 MW) under way or in planning, a pipeline of 1.2 GW is underway and the market is expected to grow by a factor of nine from its current capacity.

It added that one of the key challenges will be ensuring a reliable and sufficient power supply to support the rapid growth of data centres. Investments in power infrastructure and renewable energy sources will be crucial to address this challenge. Additionally, it would pay to develop more submarine cable networks to improve connectivity between Malaysia and the rest of the world.

For working-age Malaysians, growth in the data centre industry is great news. The industry requires many skilled workers and provides the opportunity to learn new skills and earn higher salaries. As a country, we need to invest in education and training so that our people have the skills they need for this well-paid work.

Given sufficient power and a capable workforce, the report states that the outlook for Malaysia's data centre market is brighter than in any other Southeast Asian country.