Singapore’s data centre REITs are a happy lot as more people work from home

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Singapore now has two types of landlords. The unhappy ones need folks to show up at offices, malls, hotels and factories, something that’s simply not going to happen in a hurry with the city-state’s coronavirus infections about to hit 6,000.

But there’s also a happy property owner, whose tenants live in the clouds, unaffected by social-distancing norms. For real-estate investment trusts, or REITs, that make money by hosting data, the more people pretend to work from home and watch Netflix, the better.

The Asian financial center had a much-publicized early success in containing the pandemic before an outbreak in dormitories densely packed with foreign workers, sending numbers soaring. The government, which banned tourists last month but kept schools, restaurants and bars open, has now shut down social gatherings and closed all businesses except essential services.

That has taken a predictable toll on real estate. Of all kinds, except one.

Even as retail, commercial and hospitality properties struggle, shares in Keppel DC REIT, the island’s largest landlord of data centers by market value, have recouped most of their March losses. Put it down to more people working from home.

As Bloomberg Intelligence analyst Michael Tan has noted, widespread adoption of cloud storage and external data centers could allow employers to shrink their office-based server rooms. That would boost demand for leasing space from the likes of Keppel DC.

But there’s more to the story. Singapore and Hong Kong, rivals in many other spheres, also compete to host computer servers. With Covid-19 deepening the rift between Washington and Beijing, there’s a strong likelihood that Hong Kong’s prospects will fall victim to a harder American line on China. U.S. officials recently refused permission to Google to turn on a high-speed internet link with the Chinese territory on national security grounds, while allowing a similar connection to proceed with Taiwan, the Wall Street Journal reported. In this fraught environment, it should be very clear to Alphabet Inc. and Facebook Inc. that Singapore is a safer choice.

Outside of China, the potential market for digital consumption in India and Indonesia is large because of the sheer size of their populations. But they also happen to be the least competitive in Asia-Pacific for hosting data centers, according to Cushman & Wakefield Plc. Measured by power supply, Singapore is now the world’s largest repository for storing and processing data, with Facebook alone setting up an 11-story facility, its first such custom-built center in Asia.

In retail-crazy Singapore, owning malls was looking like a bad idea even before the virus. E-commerce was hollowing out physical stores, hurting segments like electrical goods, electronics, home furnishings and telecommunications especially hard.

The coronavirus has further buttressed the appeal of tenants who don’t need footfalls to pay rent. As long as the existing data centers hold their value, REITs can take advantage of collapsing global interest rates to shop for factories that can be modified as server farms. Their retail and commercial peers, meanwhile, could be bumping up against their 45% regulatory leverage limit, should their real-estate values drop by 15% to 30%. They won’t be going out to expand any time soon.

Their home-bound customers, too, may be stuck in a Google Classroom or a Zoom work meeting. The wealthy but aging chunk of Singaporeans who invest in data center REITs will be happy landlords, collecting a decent rent.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.