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Demand for data means greater opportunities for Hong Kong

Hong Kong POV Demand Data 1536x1040

Hong Kong has a long history as China’s gateway to the world, and in the past few decades has become a hub for corporate regional headquarters, especially for financial institutions. This has driven demand for both prime urban real estate and information technology infrastructure. According to the International Data Corporation, global data production will increase to 175 Zettabytes (175 trillion Gigabytes) by 2025, an estimated annual growth rate of 27%.

The digital economy is one of the biggest drivers of data centre demand, as more and more companies are adopting and integrating cloud services, big data, AI and machine learning, and soon 5G. A breakdown of demand shows:

  1. Network and Internet Service Providers 30%: This is tied to increased mobile technology use.
  2. Hyperscale 23%: This includes companies such as Google, Amazon, Facebook, Alibaba, and Tencent. Demand from this sector is primarily driven by the widescale adoption of the cloud, and a significant growth in e-commerce. Elements such as big data, automation, data analytics, machine learning and the Internet of Things are also supporting data centre demand from these companies.
  3. Financial services 21%: This includes both operations and fintech services such as cashless payment apps.
  4. Content and Digital Media 12%: Demand from these industries is a result of a shift into digital platforms for services such as multimedia entertainment, gaming advertising and content delivery.
  5. Government 3%: As the government adopts more technologies and pushes for a smarter city, it is also increasing its demand for data centre capacity.
  6. Other Enterprises 11%: Demand from other tenants due to outsourcing of operations to technology firms.

Across all sectors, cloud computing is a key driver of data centre demand. According to the Data Centre 2025 survey conducted by Emerson Network, 67% of respondents believe at least 60% of computing will be cloud-based by 2025. According to the latest forecast by Cisco Global Cloud Index, global workloads for data centres will grow threefold from 2014 to 2019 - with global cloud traffic growing by a compound annual growth rate of 33% within this period.

As banks look to maintain their ability to interact with a more technology-focused consumer base, and to keep a high level of competitiveness, many are turning to digitisation - which is pushing the need for data storage. Banks and Fintech companies also look to partnerships and mergers and acquisitions as a way of diversifying the services they offer and tapping into new technologies. Today’s financial institutions use large amounts of data, as players compete to make banking more convenient and accessible. With more and more transactions being made through online banking, mobile banking apps and through cashless payment apps, the need to store and manage data is greater than ever.

Like retailers, banks and financial institutions are looking to create a more personalised experience for their customers. For many years, Hong Kong has widely used the Octopus Card for cashless payments, which has now been joined by HSBC PayMe, Alipay and WeChat pay, which are being adopted even more broadly. According to McKinsey’s Global Payments Map, digital payments in China accounted for approximately 45 percent of digital payments worldwide in 2019.

Hong Kong as a strategic location

With its high degree of connectivity to undersea cables, Hong Kong is well-positioned to meet global demand for data services. Fintech companies prefer data centres close by, in order to facilitate the large volume and high speed of the transactions that take place. Having data centres nearby reduces latency and allows for a much smoother process. However, business continuity concerns for large institutions requires data storage in separate locations to minimise enterprise risk and reduce the likelihood of total failure in the event of a natural disaster or a power outage. Given our relatively low risk of major natural disasters and reliable power infrastructure, this also contributes to Hong Kong’s suitability as a regional hub or backup location for data.