China pushes for green data centers: MTD TV

Data center operators and investors in China have become more cautious in pursuing new deals this year after the government tightened its grip on the power-hungry sector through tough rules and oversight, executives said. of APG Asset Management, Gaw Capital Partners and Baker McKenzie FenXun in Mingtiandi. APAC Data Center Forum Thursday.

Johnny Shao, chief investment officer with Gaw’s mainland team, noted in the Greater China-focused forum that Chinese authorities have implemented strict planning requirements and close monitoring of center energy consumption. of data, with major cities like Beijing and Shanghai going so far as to shut down old facilities that exceed energy efficiency standards.

“Project compliance is the key to long-term success,” Shao said. “In the very beginning people will probably try to grow as fast as they can by any means possible, but eventually as governments (tighten regulations) I think the market will probably be much more transparent and open, and it will reward investors or actors who have high levels of compliance.

Supporting Shao’s claims, Zhang Hong, head of the private equity practice at joint venture law firm Baker McKenzie FenXun, told the forum – which was sponsored by Yardi – that tighter regulations have slowed investment in the continent’s data centers this year. Sales of revenue-generating data center assets in the first eight months of 2022 were $490 million according to MSCI data, just a fraction of the all-time high of $3.76 billion. dollars last year.

Compliance is key

China’s sustainability guidelines for data centers are “quite stringent but achievable” according to Shao. He noted that local governments in northern China generally aim for energy use efficiency (PUE) ratios of 1.2, while in the south, where the warmer climate creates a load of cooling, target PUEs of 1.3 are more common. In Shanghai and Beijing, regulators are already forcing the closure of some older facilities with a PUE above 1.7.

Beyond certifying design and construction standards, officials have also implemented daily monitoring of operations to ensure facilities are meeting electricity and water usage guidelines. Non-compliant operators can be fined.

Baker McKenzie’s Hong said his team had witnessed greater caution from investors and operators since Chinese regulators began ramping up enforcement in the sector late in the year. last year, but said the changing environment also creates opportunities for experienced players to acquire projects from less skilled practitioners.

“I expect the most experienced [operators] and players who have a better understanding of the Chinese market and the requirements of the Chinese government will have a better chance in terms of investment opportunities, and will also have a better radar to find or identify suitable targets,” she said. declared.

Sustainable partners only

As tougher rules put more pressure on the industry, especially smaller operators, Shao said consolidation has come to the mainland’s data center market and this trend could last for up to a year. next, as experienced investors seize the opportunity to buy capacity.

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Since entering the Chinese data center market in 2018, Gaw has kept pace, making only a handful of acquisitions as the private equity firm prioritized taking on only projects that could be fully compliant with sustainability guidelines and have obtained Adequate Power Approval.

Panelists noted parallels between China’s data center regulations and those of other markets in the region, including Indonesia, Vietnam and Singapore – which recently set guidelines for data center development requiring that new installations have a PUE of 1.3 or less, as it lifted a more than two-year moratorium on the development of new projects.

“Every government wants more energy-efficient data centers to be built in the country, so I think that’s something commonly shared by governments,” Shao said.

In the Hong Kong market, Joelin Ma, director of the unlisted real estate investment team for Asia at APG, said conversion of industrial buildings for data center use is more common than development. new sites, mainly due to the scarcity of sites available in the city.

However, Ma noted that if new land is available, new land development projects offer investors the opportunity to create more efficient and sustainable projects, with APG having already invested in a pair of data center operators. active in Greater China.

“I think from APG’s perspective, it’s critical to work with a partner who has a clear path to moving sustainability forward,” she said. “It is always important for us to identify a partner who has the capacity to go further.”

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Over the past year, the Dutch pension fund manager has taken a 20% stake in Hong Kong-based OneAsia after investing earlier for a 19.1% share in the hyperscale specialist Chinese Chindata.

Japan, Korea Next

Following Thursday’s session, MTD TV will return next week with panels focusing first on opportunities in Japan and Korea, then on the challenge of tracking sustainability initiatives in APAC data centers.

During the Japan and Korea session at 10:00 a.m. HK time on Tuesday, September 20, MTD TV will host Diarmid Massey, ESR’s General Manager for Data Centers; Jing Zhou, Senior Director of Alternatives and Strategic Transactions at Nuveen; Sam Lee, Managing Director of Business and Market Development at EdgeConneX, and Bob Tan, Executive Director of the Data Center Unit of JLL’s Capital Markets Division.

The sustainability panel will take place at 10:00 a.m. HK time on Thursday, September 22.

During this session, viewers will hear from Joe Gooi, CEO of SC Zeus Data Centers; Tan Bee Lay, Sustainable Development Manager at SDAX; Josephine Yip, Senior Director of Investments and Asset Management APAC at Ivanhoé Cambridge and Cushman & Wakefield Co-Head of Sustainability Services for Greater China Alton Wong, who is also Executive Director and Head of Valuation Services and consultancy for Greater China.

In October, Mingtiandi takes MTD TV on the road for our Singapore Focus Forum, with speakers from Blackstone, Warburg Pincus, Hines and more on stage in the Lion City.

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