Advantages apparent in race for AI-led data centres

Worldwide demand for more AI-based data centres is expected to rise by over 20 per cent annually, Photo: Shutterstock

A report by Savills Vietnam, published on February 6, highlighted that much of Asia’s current data centre supply is not yet designed to support AI servers. Most investment-grade facilities are colocation data centres with an IT load, the power dedicated to IT equipment, of 10-40MW, concentrated in more mature markets.

Hence, the race to develop AI-led data centres in the region is becoming increasingly competitive.

Thomas Rooney, associate director of Industrial Services at Savills Hanoi, said, “There is leasing demand in tier-1 markets such as Seoul, Tokyo, and Hong Kong. However, the growth of rental values has begun to slow and is in the late upswing cycle. Meanwhile, tier-2 markets such as Hanoi and Ho Chi Minh City are gaining traction, positioned at the early stages of the upswing cycle with rising rental values.”

As the market becomes more competitive, yields for investment-grade properties in developed markets are compressing, averaging around 5 per cent, with rates ranging from 4-7 per cent.

“Meanwhile, data centre development initiatives in emerging markets are offering higher yields, ranging 9.5-10.5 per cent, and are attracting growing interest from investors,” Rooney added.

A report from MSCI Real Capital Analytics revealed that total data centre transactions across Asia reached $21.6 billion in 2024, nearly 10 times the volume recorded in 2023. Notable investments include KKR and Singapore Telecommunications’ $1.3 billion investment in ST Telemedia Global Data Centres, a data centre operator in Singapore.

Similarly, the Canada Pension Plan Investment Board, through a joint venture with Pacific Asset Management, has committed $686 million to developing a hyperscale data centre in South Korea.

Research by McKinsey published at the end of 2024 indicated that global demand for data centres could rise by as much as 22 per cent per year, reaching an annual requirement of up to 219GW, compared to the current level of just 60GW.

Investments in AI-led data centres are expected to continue rising in 2025, driven by major projects such as Microsoft’s $128 billion global AI infrastructure expansion, including $3 billion in India and $2.9 billion in Japan. Additionally, the US announced Stargate, a data centre infrastructure initiative supporting AI development in the United States, with initial funding of $100 billion and a total planned investment of up to $500 billion.

Last year, tech giants such as Microsoft, Meta, Alphabet, and Amazon collectively invested over $200 billion, primarily in data centres and AI-related developments.

According to the 2025 Data Centre Construction Cost Report by Cushman & Wakefield, which surveyed 90 data centre clusters across 26 cities, Vietnam ranks among the lowest-cost locations in the Asia-Pacific region, second only to Taiwan.

“Vietnam has great potential to become a data centre hub, offering competitive construction costs and land prices alongside a strategic geographical location,” said Trang Bui, general director at Cushman & Wakefield.

Specifically, the cost to build a mid-tier data centre in Vietnam is estimated at $6.9 million per MW, a 3.5 per cent increase from the previous year. Of this, power systems account for 26 per cent of costs, followed by mechanical and construction expenses at 13 per cent each.

Other costs include cooling systems, safety and fire protection, security, racks, cabinets, equipment, and cabling. Land prices make up just 5 per cent of total costs, with suburban locations featuring existing infrastructure in Ho Chi Minh City and Hanoi averaging $209 per square metre.

To secure pole position in the race for AI-led data centres in Asia, Savills experts recommend that Vietnam leverage its advantages in labour costs and a young workforce while prioritising the development of a clear legal framework to facilitate investment.

Other key areas for improvement include enhancing electricity infrastructure, ensuring grid stability, strengthening cybersecurity, raising awareness of data management, and encouraging data sharing. Learning from successful models of sustainable AI ecosystems will also be crucial.

“Looking ahead, Asia’s data centre market is poised for sustained growth, as data centres become the backbone of the digital economy, supporting various industries and enabling critical technologies. As AI continues to advance, the demand for sophisticated infrastructure will increase, creating opportunities for investment and innovation,” Rooney from Savills said.

Data centre shift is a green challenge While Vietnam is emerging as a hotspot for hyperscale data centre initiatives, the country will have to face up to their carbon emission impacts.

Vietnam must prepare for data centre development trends According to statistics from the US Chamber of Commerce, there are 244 data centres in the United States, each with an average investment of $215 million. When a data centre is built, it can generate more than $240 million for the local economy and brings in an average revenue of over $30 million.