HK data center development: Not just a land issue

IT pros comment on Hong Kong Government's data center policies[Story updated on Feb 6 2017]

Data center industry development, unlike a few years ago, did not receive massive attention in this year's Policy Address. What measures has been proposed to continue to facilitate Hong Kong's data center industry development? In light of tight land supply for data center use, can we expect to see sustainable development of the data center industry in the city?

In the Policy Address 2017 announced last Thursday, the Government proposed to optimize land use in the industrial estates. It will task the Hong Kong Science and Technology Parks (Science Park) to optimize the use of the developable sites in the industrial estates located in Tai Po, Yuen Long and Tseung Kwan O. (See figures 1-3 below for the most current maps of these sites).

Further, the Government said it would continue to implement incentive measures to encourage the private owners of eligible industrial buildings to convert them into data centers. Also, it would further streamline the procedures for issuing waivers for such purpose.

In response to this latter policy, Daniel Lai (pictured, top row, first from left), former Government CIO (2012-2015) of the Office of the Government Chief Information Officer, wanted more specifics. "This measure was first introduced [by the OGCIO] in 2012 and I had helped to set the policy," he said. "Now the Government said it would continue to 'streamline the procedures.' If there was such as need, they could have been streamlined long ago in 2015-2017. What else was needed to be streamlined?"

Lai is currently programme director of Hong Kong Jockey Club's Computational Thinking Education Programme CoolThink@JC. He is also a professor of Practice (Computing) at The Hong Kong Polytechnic University.

As regards whether the data center-related policies can effectively support Hong Kong's data center industry development, Computerworld Hong Kong spoke to some industry professionals for their views.

Positive data center growth

First off, we asked our interviewees to estimate the projected growth of data center demand in Hong Kong for the next five years.

Paul Dwyer (pictured, bottom row, third from left), Director Regional Lead Data Centre Services, Asia Pacific, JLL, said it was very hard to give a precise estimate on the growth of data centers, in terms of market demand and the resulting take up in the coming years. "But the short answer is positive," he said.

"Hong Kong has had slower than average adoption rates of public cloud previously, so large amounts of inventory will be taken up by these types of users moving forward," he reasoned. "Hong Kong has also now claimed the title of Asia's most connected market, so for connectivity reasons the need to be located here alone are now unrivalled." Dwyer also envisaged greater absorption rates from the FSI (finance and insurance) sector moving forward than what was apparent in the last 12 to 18 months.

In a similar note, Jonathan Leung (pictured, bottom row, first from left), head of Hosting Services, HKEX, said the market is dynamic and he was not aware of any projections of such. But he observed that the largest users for new data center space in the past few years were mainly cloud providers, both international ones and those based in mainland-China. "This trend may continue if the demand from end users for cloud based services can keep growing," he said.

Michael Leung (pictured, top row, third from left), president of Hong Kong Computer Society, also chief information and operations officer of China CITIC Bank International, held a more reserved attitude towards aggressive data center development. "Data center growth is mainly driven by new companies, while the internal use for data centers is usually limited. Banks like us might relocate their on-premise facilities to a third-party data center, such as IBM or China Mobile, but this is a zero sum game," he said.

Leung said new companies like cloud service providers contribute the most to the organic growth of data centers. But the growth of data center demand has become "rather stagnant" lately, unlike two to three years ago. "Hong Kong's data center market is largely dominated by two to three companies at present. But that does not explain the need to aggressively build data center capacity. After all, the current occupancy rate of data centers in Hong Kong is just 60-70%."