Domestic and international investors are increasingly turning to alternatives in the Vietnamese market such as data centres and self-storage services to diversify their portfolios and enhance return.
Last week, global telecom and data centre provider NTT cooperated with a member of GreenFeed Group to invest in a high-tech data centre in Ho Chi Minh City Hi-Tech Park with the total investment of up to $56 million.
The HCMC1 Data Centre will provide high-quality services to domestic and foreign organisations, including solutions like remote management and cloud services.
According to Yasuo Suzuki, CEO of NTT, Ho Chi Minh City is a promising market with great potential for development, with data centres likely being the bright spot of industrial real estate in 2022 and the following years. “The HCMC1 Data Centre marks a new chapter for NTT in Vietnam, to achieve our business goals through digital transformation,” Suzuki said.
It is expected that the HCMC1 will complete its first phase in Q1/2024 and the following at the beginning of 2026.
During the last days of 2021, Worldwide DC Solution Pte, Ltd, a Singaporean data centre company, was granted the investment registration certificate to develop a $70-million project named 1Hub Data Centre in OneHub Saigon – a 12-hectare campus-style business park developed by Ascendas Saigon Bund Co. Ltd. in Saigon Hi-Tech Park. Designed to meet the strict technical requirements of a third-tier data centre, the project is expected to complete construction and welcome its first tenants in 2025.
According to Hoang Long, general director of 1Hub DC, the project was born out of a vision and desire to participate in and contribute to Vietnam’s development of a digital-service economy. The project is expected to be launched in 2025. “The granting of our investment registration certificate marks a significant milestone towards our goal of serving our customers in important economic sectors such as financial services and digital economy, as well as contribute to the diversification of the technology and business community in OneHub Saigon and Thu Duc city,” Long said.
In November, Singaporean Infracrowd Capital cooperated with Trung Nam Group to set up a data centre with an investment capital of $100 million in the central city of Danang. The centre will be inaugurated in 2024.
According to Troy Griffiths, deputy general director of Savills Vietnam, there are key drivers behind the escalation in the data centre demand worldwide, such is the need for computers and digital tools, driven by the large-scale shift to work from home by many businesses and organisations.
“Digital infrastructure has never been more critical to the global economy than it is now. From February to mid-April 2020, global internet traffic increased by nearly 40 per cent, fuelled by growth in video streaming, online conferencing, online games, and social networks,” said Griffiths.
Savills data from 2021 shows that the demand for digital services has increased significantly compared to the increase in the previous decade. In 2020 alone, 59 per cent of the global population was connected to the internet, compared with only 26 per cent in 2010. Global internet traffic also increased 12 times.
Currently, most technological equipment is applied for management and monitoring purposes. According to Cisco Systems, by 2023, machine-to-machine communication will account for 50 per cent of the 14.7 billion connections. New applications emerging from the deployment of 5G will also play an essential role in the growth of connectivity over the next two years.
By 2026, the size of the global data market is expected to reach $251 billion with an average annual growth rate of 4.5 per cent.
Despite their unattractive appearance, data centres are enticing real estate as they are essential to modern life, according to Cisco Systems.
The return on the data centre is also attractive and considered a safe investment, claims the tech company. In major global markets, yields range between 4-12 per cent, as statistics from Cisco Systems show.
It is expected that, by 2026, the Southeast Asian data centre market will grow at a compound annual growth rate (CAGR) of over 8 per cent.
Opportunities for new arrivals
Bui Trang, general director at Cushman & Wakefield Vietnam, said that a data centre is an indispensable part of any business, with leases mostly being long-term contracts, and rental demand is less affected by cyclicality like traditional rental real estate, which helps investors enjoy benefits.
“It is more stable and long term. Also, the profit from the sale of data centre real estate tends to be higher than that of other rental products,” she added.
A report themed Data Centre and Cloud Growth in Emerging Markets released by ResearchAndMarkets in late 2021 assessed that, for the 2021-2025 period, Vietnam could be among the ten emerging markets for global data centre systems. The report added that Vietnam’s data centre market reached approximately $858 million in 2020 and is predicted to experience a CAGR of nearly 15 per cent by 2026.
Vietnam currently has less than 30 data centres, all of which are in large cities. Apart from international developers, some Vietnamese enterprises like Hanoi Telecom, FPT, CMC, and Viettel IDC are involved in this business. Viettel IDC holding the most significant data centre market share in Vietnam has so far put into operation five data centres across the country with a total area of 25,000 square metres.
In addition, FPT has also launched four large data centres in Ho Chi Minh City and Hanoi with the total investment of about $8.7 million.
Figures from Viettel IDC show that the average growth rate of the cloud market in Vietnam over the last three years has been about 40-45 per cent, while the average growth rate worldwide is 29 per cent. It is expected that by 2025, the growth rate of the Vietnamese market will remain at 40 per cent, while the global average is forecasted to be around 25-29 per cent.