Significant Collaboration
Singapore’s sovereign wealth fund, GIC, is teaming up with domestic institutional investors to undertake a substantial data center project. Despite challenging investment market conditions due to factors like consecutive interest rate hikes, data centers are gaining popularity as a stable and attractive investment destination.
According to industry sources on July 20, global institutional investors, including GIC, are collaborating with domestic institutional investors, securities firms, and asset management companies to establish a data center in Goyang City, Gyeonggi Province. The total project cost amounts to approximately 900 billion won (US$704.23 million), with the Police Mutual Aid Association participating by providing 30 billion won through project financing loans last month.
While concerns have emerged over a slowdown in the real estate market, domestic financial institutions have shown remarkable interest in this data center project driven by an optimistic outlook for the domestic data center market and the relatively high loan interest rates. Indeed, the loan interest rate for this data center development stands at 8 to 9 percent. The project aims to be completed in about three years, with a target year of 2026.
GIC, a major player in the global investment industry with assets under management (AUM) of around 900 trillion won, is playing a pivotal role in this data center project. GIC’s real estate portfolio increased to 10% by the end of March last year, representing a 2 percentage point surge from the previous year.
Notably, GIC made an assertive investment move during a time when domestic institutional investors hesitated to engage in new investments due to the burden of high-interest rates. GIC capitalized on the situation, benefiting from the depreciation of the Korean won against the Singapore dollar, and made aggressive investment moves. Apart from this project, GIC is also setting up a massive data center in Seoul through a joint venture worth 630 billion won with Equinix, a U.S. data center real estate investment trust (REIT), aiming for completion later this year.
The global surge in demand for AI-driven technologies like ChatGPT and cloud services has intensified the need for data centers capable of processing vast amounts of information. As a result, data centers are drawing considerable attention from major investors worldwide. Compared to office buildings, data centers offer longer lease periods and boast higher renewal rates due to equipment investment, ensuring a stable income stream and contributing to market growth.
According to market research firm Arizton and global real estate consulting company Colliers, the domestic data center market is expected to grow at an average annual rate of 6.7 percent and reach around 8 trillion won by 2027. This represents a whopping 60 percent increase compared to the 2021 figure of US$3.9 billion. Additionally, the number of data centers is projected to exceed 200 this year, up from 177 in 2021.
Given South Korea’s rising prominence as a central hub in the data center market, international investors are increasingly focusing on the country’s data center investments. For instance, the Canada Pension Plan Investment Board (CPPIB) has been joining hands with Pacific Asset Management Co. to develop the “Jukjeon Pacific Sunny Data Center” in Yongin City, Gyeonggi Province, with completion targeted for next year. Goldman Sachs has also announced its plan to invest about 2 trillion won (US$1.56 billion) in domestic logistics and data centers. Furthermore, foreign institutional investors such as Actis, Stonepeak, BlackRock, Gaw Capital, and Empyrion are actively pursuing data center investments, acquiring stakes or properties in the Korean market.