Singapore is expected to retain its position as Southeast Asia’s premier data center hub despite mounting power and land constraints, but stricter sustainability requirements will continue to limit new capacity and push more investment into neighboring Malaysia and Indonesia, BMI Country Risk and Industry Research said in its recent report.
The research house said Singapore would have about 1.46 gigawatts (GW) of live data center capacity in 2026, the largest in Southeast Asia, underpinned by its mature digital ecosystem, extensive connectivity and continued investments by global technology companies.
However, expansion is expected to remain tightly controlled, with only 20 megawatts (MW) currently under construction against around 980MW in the development pipeline, highlighting a widening gap between surging demand for artificial intelligence (AI) and cloud infrastructure and the pace at which new capacity can be approved.
“The imbalance suggests compliant supply will remain structurally below demand,” BMI said.
It expects demand from hyperscale cloud providers and AI operators to continue exceeding available capacity as investments by major technology firms accelerate.
It is noted that Amazon Web Services has committed $9 billion to expand its cloud infrastructure in Singapore, while Microsoft announced a $5.5 billion investment earlier this year as part of a broader $6.5 billion Southeast Asian cloud and AI infrastructure program through 2028. Google Cloud also continues to expand its established cloud region in the city-state.
BMI said those investments, combined with rising enterprise digitalization and AI adoption, would keep demand elevated despite the government’s tighter control over new developments.
Singapore imposed a moratorium on new data center projects in 2019 because of concerns over electricity consumption and limited land availability before lifting the freeze in 2022 under a much stricter approval framework.
Under the second Data Centre Call for Application (DC-CFA2), which closed in March this year, the government will allocate at least 200MW of new capacity only to operators meeting stringent sustainability requirements, including a power usage effectiveness (PUE) below 1.25, Green Mark Platinum certification and at least 50% green energy sourcing.
BMI said the framework effectively makes sustainability a competitive advantage rather than simply a regulatory requirement.
“The market is increasingly filtered by execution capability and demonstrated sustainability credentials rather than by the number of potential entrants,” it said.
The stricter rules are expected to strengthen the market positions of well-capitalized incumbents and hyperscale operators such as Equinix, Microsoft, GDS, AirTrunk, Singtel-owned Nxera and Keppel, while making it more difficult for speculative developers to secure approvals.
BMI also expects market concentration to increase as access to new capacity becomes the industry’s primary competitive battleground.
It is noted that Singapore is raising energy efficiency standards across the sector. In August 2025, the government introduced a new energy management standard aimed at reducing information technology (IT)-related energy consumption by 30 percent through improved operational practices.
The policy is intended to balance the country’s ambition to remain a global digital infrastructure hub while managing increasing electricity demand from AI workloads.
Despite the restrictions, Singapore continues to plan strategic expansion.
The largest project in the pipeline is a proposed 700MW green data center park on Jurong Island, announced in October 2025. The project, which will reserve 10 percent of its land for new energy technologies, is expected to become Singapore’s largest data center development and could significantly increase future capacity once completed.
BMI said the project would materially expand long-term supply but would not eliminate near-term shortages, given the rapid growth in AI computing demand.
The International Energy Agency estimates electricity demand from data centers across Southeast Asia will more than double by 2030, with Singapore and southern Malaysia expected to remain the region’s principal digital infrastructure corridor.
Singapore’s role as the region’s digital gateway is further reinforced by the SIJORI Growth Triangle linking Singapore, Johor and Indonesia’s Riau Islands.
BMI said the increasingly integrated ecosystem allows Singapore to host high-value computing, cloud and connectivity services while neighboring Johor and Indonesia’s Batam absorb more power-intensive data cente developments.
The trend has accelerated since Singapore introduced its development moratorium in 2019, creating opportunities for Malaysia, Indonesia and, increasingly, Thailand to attract projects that could not secure approvals in the city-state.
Malaysia, particularly Johor, has emerged as the largest beneficiary of this spillover as developers take advantage of lower land costs, greater electricity availability and close proximity to Singapore.
BMI expects the pattern to continue as AI workloads become increasingly power-intensive and regulatory requirements in Singapore remain among the strictest globally.
The research house also noted that Singapore stands to benefit from the global surge in AI infrastructure spending beyond data centers.
It sees the country is well positioned to capture upstream opportunities in semiconductor manufacturing and advanced chip packaging as global technology companies ramp up AI investment.
Meta’s plan to spend up to $135 billion on AI infrastructure in 2026 alone is expected to support demand across the semiconductor supply chain, benefiting Singapore’s established electronics manufacturing ecosystem, it added.
Among domestic operators, Singtel’s data center unit Nxera is expanding its footprint through its 58MW DC Tuas facility, which is scheduled to begin operations by the end of 2026. The project is designed to achieve a PUE of below 1.3 and is supported by a $476 million green loan secured earlier this year.
Keppel is also expanding its digital infrastructure business, with plans to double its power capacity by 2030 to support rising enterprise and AI-related demand.
BMI said environmental, social and governance (ESG) considerations have become a prerequisite for growth rather than a differentiator.
Beyond electricity supply, water availability is emerging as another major constraint for future developments, while operators are increasingly relying on sustainable financing to support expansion and satisfy investor expectations.
Although Singapore’s sub-1.25 PUE requirement is among the most stringent globally, BMI said the standards reinforce the country’s long-term competitiveness by ensuring only highly efficient facilities are built.
While capacity growth is likely to remain deliberately constrained, BMI expects Singapore to retain its status as Southeast Asia’s Tier-1 data center hub, with neighboring markets continuing to complement rather than replace its role in the regional digital infrastructure ecosystem.
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