The Rise of Tier-2 Data Centre Markets in Asia

For most of the past decade, the Asian data centre market was effectively a story of five cities: Singapore, Hong Kong, Tokyo, Sydney, and Mumbai. These were the markets where hyperscalers anchored their regional infrastructure, where latency requirements were met, and where the regulatory and connectivity environment was mature enough to support enterprise-grade deployments. That concentration is now breaking down, driven by a combination of capacity constraints, cost pressures, and the sheer scale of demand that AI workloads are generating.

Johor, Malaysia — just across the causeway from Singapore — has emerged as the most dramatic example of this shift. Microsoft, Google, and ByteDance have each committed to multi-billion dollar data centre campuses in the Johor corridor, attracted by land availability, lower power costs, and the Malaysian government's active courting of hyperscaler investment. The total committed investment in Johor's data centre sector now exceeds US$10 billion, and the infrastructure ecosystem — power substations, fibre connectivity, cooling systems — is being built out at a pace that would have seemed implausible three years ago.

Jakarta and Chennai are following a similar trajectory. Indonesia's data centre market is being driven by domestic demand — a population of 280 million with rapidly growing digital consumption — as well as by the government's data localisation requirements, which effectively mandate that certain categories of data be stored on Indonesian soil. Chennai, meanwhile, is benefiting from India's broader digital infrastructure buildout and its position as a major subsea cable landing point connecting South Asia to Southeast Asia, the Middle East, and Europe.

For investors, the tier-2 market opportunity is real but requires careful navigation. The assets are less liquid than those in established markets, the regulatory environment is more complex, and the operator ecosystem is less mature. But the return premium for taking on that complexity is meaningful — and the window before these markets become fully institutionalised is still open. At Lensbridge, we have been building relationships and deal flow in these markets for several years, and we see them as one of the most compelling areas of opportunity in Asian digital infrastructure today.