Local data center markets attracting global investors

MANILA, Philippines — The country’s capital remains on the radar of global data center investors amid digitalization, according to a report by Cushman and Wakefield.

In Global Data Center Market Comparison report 2023, Cushman and Wakefield included Manila for the first time as among 63 global markets profiled.

“Manila, another new entrant in the survey, has been steadily attracting interest among major players due to the strategy of many corporates towards migration to digitalization, presence and demand for cloud storage due to network technology sophistication and the rapid growth of the digital economy of the Philippines,” Cushman and Wakefield said.

Cushman and Wakefield Philippines director and head of research, consulting & advisory services Claro Cordero said the COVID-19 pandemic has served as a catalyst for digitization in the Philippines that caused a huge shift in how businesses and organizations operate.

“Along with the adoption of hybrid work model among many companies, the country’s online economy has shown vibrant growth over the past years, and it is expected to have grown by 22 percent in 2022 to $20 billion from only $16 billion a year prior. The country also boasts a rising middle-class segment and high internet penetration, which is estimated at around 68 percent of its total population of around 111 million in 2022,” Cordero said.

Meanwhile, Cordero also highlighted that the government is promoting the transformation and digitalization of government processes and transactions under Senate Bill 1793 or the Full Digital Transformation Act of 2020, a bill that seeks to mandate all government agencies, government-owned and controlled corporations (GOCCs), instrumentalities and Local Government Units (LGUs) to adopt a digital plan that aligns with the Philippine Digital Transformation Strategy 2022.

The current administration has proposed a budget of P12 billion to support digitization efforts.

“Over the past few years, a number of new legislations took effect to boost the Philippines’ attractiveness as an investment destination and deliver the much-needed digital transformation. The enactment of the Republic Act (RA) 11659, which amends the 85-year-old Public Service Act (PSA), liberalized various economic sectors, including the telecommunications industry to allow up to 100 percent foreign ownership,” Cordero said.

In addition,  the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act also took effect, immediately cutting the corporate income tax rate of 30 percent to a low of 25 percent retroactively from July 1, 2020, which will “further boost the attractiveness of the Philippines for foreign investments.”

While the local data center market continues to gain traction from global data center investors, owners, operators and occupants, Cordero noted that more needs to be done to realize the full potential of the country’s data center market.

“Tapping its full potential entails a heightened need for investments in support infrastructures to address the demand for fiber connectivity, reliable power supply sources and sustainability concerns, as well as availability of global-standard real estate options and ample measures to mitigate various related business risks,” Cordero said.

Apart from Manila, other new entrants to the survey include Bangkok, Johor, Hyderabad and Ho Chi Minh.

“We are seeing significant investment and interest in Bangkok, Ho Chi Minh, Hyderabad, Johor and Manila and we expect this to continue, along with interest in other primary and secondary markets in the region,” Cushman & Wakefield Asia Pacific head of data center advisory team Vivek Dahiya said.

The report ranked Northern Virginia and Portland in the United States as the top data centers market globally.