Data centers are finding new homes in old buildings

As the demand for data rises, investors are opting to convert old office buildings or empty warehouses into data centers as a quicker, more cost-efficient alternative to new builds.

In Hong Kong, for instance, logistics real estate manager ESR acquired a cold storage facility last year and is converting the brownfield site into a 40-megawatt data center after recently receiving permission from the town planning authority.

In the U.S., the 15-story Union Bank Tower, a 54-year-old office building in Portland, Oregon, is being sold for repurposing into a data center facility.

The construction for a new data center can take up to 26 months, and that excludes the permitting process, says Chris Street, Managing Director of Data Centers, Asia Pacific, JLL.

But the types of conversion investors are currently pursuing usually take only around one year to complete.

“This rush to bring new data centers onstream stems from the need to cope with the rapid digitization and surging demand for online and digital services,” Street says.

Data center shortages

In the Asia Pacific region, demand is still outpacing the current supply pipeline, indicating the trend of conversions will likely persist.

“Two of the main drivers are hyperscalers from the U.S. and China, such as Amazon and Alibaba, and the start-up ecosystem in the region, which is home to many super apps built on the cloud,” says Street.

Asia Pacific grew to become the largest data center region in the world two years ago and continues to expand at a compound annual growth rate (CAGR) of up to 16% year-on-year, according to data from Structure Research.

“Within the region, we are still completely underutilized and undersupplied in terms of the long-term aspects of digital infrastructure,” says Street. “We expect to see more conversions taking place, particularly in markets like downtown Jakarta, Kuala Lumpur, and Taipei due to the interconnection needs.”