INTERVIEW 'AI and machine learning to further fuel Korea's data center market growth'
John Pritchard, Cushman & Wakefield's head of Tenant Advisory Group and Korea Data Center Advisory Team lead / Courtesy of Cushman & Wakefield
As Korea burgeons into a pivotal data center hub in the Asia Pacific region, the advancing frontier of artificial intelligence (AI) and machine learning will function as a key factor for the nation's data center market growth in the coming years, Cushman & Wakefield's Korea data center advisory team lead highlighted.
In a recent exclusive interview with The Korea Times, John Pritchard, head of Cushman & Wakefield's Tenant Advisory Group and leader of the Korea Data Center Advisory Team, emphasized that both domestic and global data center markets are projected to retain their allure for investors due to the favorable business conditions prevailing in these markets.
"The more technology we use, the faster the technology is, the more data centers we need in order to absorb and to supply that information," Pritchard said, adding that demand for data will increase as AI technologies continue to proliferate, requiring larger and more capable data centers.
He explained that the growing trend of remote work, the rising popularity of streaming services on OTT devices, and the widespread adoption of AI-based chatbots and services by companies are collectively propelling a surge in the demand for data sourced from data centers.
"The recent emergence of AI and machine learning will remain a key demand driver for the Korea data center market in upcoming years. These applications and services require significant computing power to function and are best supported in new age data centers, which can accommodate high power requirements, necessitating further development of these facilities across the country," he underscored.
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Historically, the data center market in Korea was mainly dominated and led by domestic operators and telecommunication businesses, including SK broadband, Lotte Data Communication, LG U+, and other Korean conglomerates and big tech firms, such as Naver and Kakao.
Recognizing the promising growth potential of the Korean market, buoyed by its robust digital economy and infrastructure network, prominent international players have recently made significant inroads. Notable entrants include Digital Realty and Equinix, alongside fund-backed colocation platforms like SC Zeus, Empyrion Digital, and Stack Infrastructure.
"Global trends, such as increased cloud adoption and migration, have seen international cloud service providers initiate expansion strategies across multiple markets, including Korea," Pritchard said.
Greater Seoul is premier data center market
Regarding the distinctive appeal of Seoul and its surrounding capital areas in attracting data centers, the lead of the global real estate service firm's Korea data center advisory team outlined several key factors. These include the region's robust infrastructure, sophisticated power grid, and its status as a thriving hub for commerce and industry.
"Approximately 50 percent of Korea’s population lives near to Seoul and is the country’s principal city, the main hub for commerce and industry. From an operator perspective, it is the prime location in Korea to be close to end users and customers. Seoul hosts Korea’s largest office market and is the hub for innovation," he said.
"The Greater Seoul area is supported by strong infrastructure, extensive fiber networks and a sophisticated power grid and transport network. In addition, the city’s large population enables operators to benefit from a large pool of skilled labor," he emphasized.
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Gov't decentralizes data centers
While Pritchard acknowledged that the greater Seoul area will remain as the essential target for hyperscale and colocation groups owing to the large population, customer base and strong latency profile, he said more attention is being afforded to secondary and tertiary cities, equipped with the requisite power, zoning and infrastructure.
The impetus behind such a move stems from the Korean government's policy directive aimed at decentralizing data center markets. This shift is necessitated in part by the mounting constraints facing the Greater Seoul area, including limited available land, escalating construction costs, constrained supply, and power restrictions. Consequently, this is poised to catalyze an uptick in the provision of regional data centers across the country.
"Government incentives have been created to encourage data center development to be directed into neighboring provinces, such as Gangwon Province, South Jeolla and North Jeolla Provinces. The incentives available vary from reductions on the electricity facility levy, support in land offerings, plus investment subsidies, which are being offered by select regional governments," he said.
"So moving forward there's probably going to be a decentralization into locations where the government is very pro-data center and pro-job creation, and also where there's potential new green energy," he added.
Locations such as Busan, Korea’s second largest city, may also benefit from the policy direction, due largely to its strong cable connectivity, developed infrastructure and strong labor pool.
"The development of data center hubs outside of Seoul may bring about high efficiency, power security and stable grid networks. However, there may be associated latency challenges," he noted.
Currently, Korea is home to the fifth-largest data center market in Asia, trailing behind China, Japan, India, and Singapore. However, fueled by the ongoing development pipeline, Korea is estimated to potentially reach an operational capacity of 1,485 megawatts (MW) in the foreseeable future. This trajectory could see Korea surpassing Singapore, currently at 1,307 MW, to claim the title of the fourth-largest data center market in the Asian region within the next five to seven years.