Asia-Pacific could face a shortfall of 15 to 25 gigawatts of data center capacity by 2028, even as the region’s installed base expands from 13.3 GW today to 30 GW over the next two to three years, according to a report by CBRE.
The growing mismatch between data center supply and demand is being driven by the rapid rise of artificial intelligence workloads and cloud migration, outpacing infrastructure readiness and exposing limitations in power grid access and permitting processes.
“Despite an expected doubling of Asia-Pacific data center supply in the next three years, there will still be a shortage of 15 to 25 GW by 2028,” the report said.
The projected gap amounts to 25% to 42% of total forecast demand, with significant implications for enterprise digital infrastructure strategies.
AI drives exponential power needs
CBRE’s report, citing research from McKinsey, noted that global data center demand is rising at 19% to 22% annually through 2030, with AI-related workloads projected to account for 70% of the total by the end of the decade.
Unlike traditional compute workloads, AI infrastructure requires significantly more power and cooling. AI-optimized data centers typically need more than 40 KW per server rack, compared to 5 to 15 KW for legacy environments. The report also highlights new demands such as liquid cooling, reinforced floors to accommodate racks exceeding 2,500 kilograms, and ultra-low-latency connectivity.
Many of the region’s data centers, including new builds underway, were designed before these requirements became mainstream. This is creating what CBRE described as “a severe shortage of AI-ready data center space.”
Grid limitations slow development
Power availability is emerging as the primary bottleneck across several markets. In Greater Tokyo, timelines for securing grid access have extended to 48 to 60 months — up from 36 months prior to the Covid-19 pandemic, the report added.
Some governments have responded with regulatory restrictions. Singapore paused new data center approvals between 2019 and 2022, while Taiwan has halted development of facilities larger than 5 MW north of Taoyuan since mid-2024.
CBRE cited International Energy Agency data showing that electricity supply in Asia-Pacific is increasing at just 4.2% annually, well below the growth rate in data center demand.
Equipment supply chains are also under pressure. The report found that 75% of projects experienced equipment delivery delays over the past year, with generator lead times now reaching up to 16 months.
Rising construction costs further complicate expansion. Tokyo ranked as the world’s most expensive city for data center development in 2023, and Singapore saw costs double between 2018 and 2023.
Emerging markets absorb overflow
As major hubs struggle with capacity constraints, developers and hyperscalers are turning to emerging markets, the report noted.
According to the report, India has become a focus for cloud service providers, particularly in Mumbai and Chennai. Malaysia has the largest data center development pipeline in Southeast Asia, centered in Johor to capture spillover from Singapore. Thailand is investing in Chonburi and the Eastern Economic Corridor, while Vietnam has opened to foreign investment after lifting data center ownership caps in 2024.
Within developed markets, decentralization is underway. Japan is prioritizing Hokkaido and Kyushu for new development, while South Korea is directing builds to the south, near nuclear generation capacity.
“With the power shortage unlikely to be resolved in the near term, authorities and data center investors are gradually decentralizing new developments to tier-two cities,” the report said.
Investment appetite remains strong
Despite these headwinds, the sector remains attractive to investors. Direct data center investment across Asia-Pacific reached $4.7 billion in 2024. The year’s largest transaction was Digital Realty’s $24 billion acquisition of AirTrunk, which CBRE identified as the largest global data center M&A deal in 2024.
Data centers ranked second among preferred alternative investments in CBRE’s 2025 regional investor survey, driven by stable lease structures and long-term cash flow expectations.
“Investor confidence in data centres is expected to strengthen over the remainder of the decade,” the report said. “Strong demand and solid underlying fundamentals fuelled by AI and cloud services growth will provide a robust foundation for investors to build scale.”
Enterprise strategies must evolve
With supply constrained and prices rising, CBRE recommended that enterprises rethink data center procurement models. Waiting for optimal sites or price points is no longer viable in many markets.
Instead, enterprises should pursue early partnerships with operators that have robust development pipelines and focus on securing power-ready land. Build-to-suit models are becoming more relevant, especially for larger capacity requirements.
Smaller enterprise facilities — those under 5MW — may face sustainability challenges in the long term. The report suggested that these could become “less relevant” as companies increasingly turn to specialized colocation and hyperscale providers.
Still, traditional workloads will continue to represent up to 50% of total demand through 2030, preserving value in existing facilities for non-AI use cases, the report added.
The region’s projected 15 to 25 GW gap is more than a temporary shortage — it signals a structural shift, CBRE said. Enterprises that act early to secure infrastructure, invest in emerging markets, and align with power availability will be best positioned to meet digital transformation goals. “Those that wait may find themselves locked out of the digital infrastructure they need to compete,” the report added.
Source:: Network World