On the 14th, Executive Min Soo-hee from the Capital Markets Division is interviewing with ChosunBiz at the JLL Korea headquarters in Yeongdeungpo-gu, Seoul. /Courtesy of JLL Korea
코로나19 팬데믹(세계적 대유행)을 거치며 국내 투자자들이 물류센터를 찾자, 해외 투자자들은 데이터센터로 눈을 돌렸다. 이때 투자한 데이터센터들이 최근 준공되고 있으며, 국내 투자자는 작년부터 데이터센터를 보는 분위기다. 데이터센터 투자 시 예상 수익률을 보면 캡레이트(Cap Rate·부동산 매입가격 대비 순임대소득)는 5%대 수준으로, 국내 A급 오피스 자산(4.5%)보단 높고 물류센터(5.5%)와는 비슷하다.
Min Soo-hee, executive director of JLL Korea's capital markets division, noted that as domestic investors sought logistics centers amid the COVID-19 pandemic, foreign investors turned their attention to data centers. The data centers invested in at that time are now being completed, and domestic investors have shown interest in data centers since last year. The expected revenue from data center investments shows that the cap rate is around 5%, which is higher than that of a-grade office assets (4.5%) but comparable to logistics centers (5.5%).

As data centers emerge as critical infrastructure in the artificial intelligence (AI) era, investment worldwide is rapidly increasing. According to the Korea International Trade Association, the annual growth rate of investments in data centers by major global corporations was about 21.1% from 2003 to 2021, but after the emergence of generative AI in 2022, the average growth rate surged to 169.4%, more than eight times higher. The domestic data center market is projected to grow from 6 trillion won to 10 trillion won in three years.

Recently met at the headquarters of JLL Korea in Yeouido, Yeongdeungpo District, Min Soo-hee (44), who has been in charge of data centers since the late 2010s, is one of the few experts in South Korea. Major deals, including the first transaction of a data center in Hanam City, were conducted under Min's supervision and JLL Korea.

Min holds a bachelor's degree in real estate and management information systems from Korea University and a master's degree from Sungkyunkwan University Business School (EMBA). She has accumulated approximately 20 years of experience in acquisition and disposition advisory, leasing advisory, and overseas real estate investment strategy consulting. She is currently focused on consulting in the acquisition and disposition of data centers and logistics centers.

Min stated, "The commercial real estate market continues to change with the sectors investors are seeking; of course, the office building sector remains the largest, but the trend is shifting toward hotels, logistics, and data centers in that order. Data centers differ from other commercial properties in that, in addition to investors, they require matching with suitable operator businesses, which is a characteristic feature."

She continued, "Security is more important for data centers than for other sectors. If something goes wrong here, the servers go down, so most are hesitant to expose their specific locations. Although data center development in Korea has lagged behind that of other countries, there is a recent movement from the government level to promote it." The following is a Q&A with Min.

The data center in Hanam City, Gyeonggi Province, is acquired by Macquarie Asset Management from IGIS Asset Management. JLL Korea oversees the project. /Courtesy of Macquarie Asset Management

─What sets data centers apart from other commercial real estate sectors?

"In the case of offices or logistics centers, tenants mostly target the domestic market. However, what sets data centers apart is that they tend to operate globally, not just focusing on the domestic market. Simply put, while investors seeking logistics centers look for properties only within Korea, data center investors compare locations across Korea, Japan, Malaysia, and Singapore. It can be seen as a kind of international competition."

─Who is your main client base?

"Real estate investment itself is a part of the alternative investment market, but within this, offices are considered a traditional sector, while logistics and data centers are viewed as new sectors. Until a few years ago, there were many foreign investors with significant capital, such as Blackstone and Brookfield. However, domestic investors, like the National Pension Service, began to act from last year. The National Pension Service issued guidelines stating that, as it recruits operators this year, it must include data centers and urban logistics in the new real estate investment area called 'new economy sectors.' When pension funds act, other domestic investors tend to follow suit."

─Where are they primarily developed?

"Data centers are highly dependent on latency, which is how fast communications can reach their destination. Therefore, proximity to Points of Presence (POP) is crucial. Most existing data centers are situated accordingly. In Seoul, popular areas for 'POP' include Sangam-dong, Mokdong, and Gasan, typically within 10 km of these locations. However, as these areas are mostly residential, the land prices are high, so there is a trend of moving to the Gyeonggi Province. New cities like Ilsan in Goyang, Bucheon, Ansan, Yongin, and Incheon are gaining attention as potential sites. Recently, even Uijeongbu is starting to see data centers being established."

Moreover, water is essential for cooling the immense heat generated by servers and network equipment in data centers. Locations providing easy access to large-scale power and water supplies are often industrial complexes, which is where many data centers are being constructed. Industrial complexes also have the advantage of being less expensive compared to other sites in the metropolitan area. In the end, once a data center is established, others typically follow suit, as it creates a POP.

─What is the vacancy rate like?

"In the past, some data centers had vacancies, but many of those completed last year and this year are already occupied. As data centers need to be constructed with the initial technology, they confirm technical aspects with large firms such as cloud service providers (CSPs) that utilize more than half of the center. This is different from other sectors where leasing occurs just before or after completion. Considering these factors, it seems that the supply is still insufficient compared to demand, especially within Seoul. The (more distant) metropolitan area may see significant future supply, but it is less favored due to latency issues."

Illustration=ChatGPT DALL-E 3

─What about rental prices?

"Generally, rental prices for office buildings do not differ greatly among low, mid, and high floors. However, data centers should be categorized into three main groups. CSPs using 10 megawatts (MW) or more pay around 100,000 to 200,000 won per month, while wholesale rates for companies using about 1 MW are around 200,000 won to the mid-300,000 won range, and retail tenants may pay up to 400,000 won."

─When do you expect the peak?

"It is not yet at its peak. Overall, in terms of the development environment, land prices have passed their peak and are coming down, but demand continues to grow, so it may be more accurate to say that we are heading toward a peak. However, it is difficult to predict the data center demand, making it hard to know when the peak will occur. As generative AI becomes part of daily life, the need for data centers will increase, but no one knows how long or how much this capacity will grow."

─How will the data center market change in the future?

"The data market is trending toward bifurcation. There will be data centers for AI purposes and edge types aimed at general corporations. AI-oriented data centers take time to operate and require large capacities, making them less sensitive to latency issues. This means that they do not necessarily have to be located in Seoul. In contrast, edge-type data centers for data backup require rapid transmission and must be situated near headquarters. Therefore, they are mostly distributed in Seoul, and from the outside, they often appear as offices."