DEVELOPMENT AND VALUATION OF DATA CENTRES IN SINGAPORE

Abstract

Real estate valuation is a professional discipline necessary to estimate the market price of any real estate at a particular point of time, ensuring real estate markets to function efficiently. With the advancement of data analytics and cloud computing as well as the goal of becoming a Smart Nation, Singapore has embraced smart technologies and stronger digital connectivity increasing data production, increasing the need for data centres to provide a conducive environment for data storage and processing. Despite such a growing phenomenon, few research are done to analyse the data centre market and the valuation methodologies for data centres in Singapore. This provides the key motivation of this study. Similar to other asset classes, the value of data centres is driven by demand and supply. As such, this study first evaluates the data centre asset class and the data centre market in Singapore by analysing the key attributes of data centres in Singapore and the impacts on key players comprising of developers, the government, tenants and investors respectively. The analysis is done by conducting in-depth interviews with five real estate consultants consisting of data centre specialists as well as expert valuers. Having analysed the demand and supply of data centres, this study subsequently evaluates the valuation methodologies used to value a data centre. Being an income producing asset class, two valuation methodologies are deemed suitable to value a data centre. The two methods are the direct capitalisation method and the DCF Model.