Singapore’s highly restrictive regulatory framework is reshaping Southeast Asia’s data center landscape, with neighboring Johor, Bangkok and Jakarta emerging as key beneficiaries of hyperscale investment as operators seek larger sites, lower costs and greater expansion opportunities, according to a report by Knight Frank revealed on Thursday.

The property consultancy said Singapore remains one of Asia-Pacific’s most established data center markets with more than 1.1 gigawatts (GW) of live information technology (IT) capacity, but severe land, power and water constraints are forcing the city-state to adopt one of the region’s most selective approval regimes for new developments.

Singapore, which occupies just 745 sq km, hosts more than 60 data centers that already consume about 7 percent of the country’s electricity. That share is expected to rise to 12 percent by the end of the decade, underscoring the mounting pressure on national infrastructure.

Since imposing a moratorium on new data centers in 2019, Singapore has tightly controlled new capacity through competitive allocation exercises focused on sustainability.

The first Data Center Call for Application (DC-CFA) exercise in 2023 awarded only 80 megawatts (MW) of capacity to four operators — Equinix, GDS, Microsoft, and a consortium comprising AirTrunk and ByteDance.

A second round, DC-CFA2, launched in December last year, has made at least 200MW of additional capacity available.

Separately, Singapore has earmarked 20 hectares on Jurong Island for what could become its largest low-carbon data center park, with the potential to accommodate up to 700MW of capacity. If fully developed, the project would increase the country’s total capacity by about 43 percent.

Knight Frank said Singapore’s stringent sustainability requirements are likely to become even tougher.

Applicants under DC-CFA2 must achieve a Power Usage Effectiveness (PUE) of at least 1.25 while sourcing a minimum of 50% of their electricity from renewable energy, among other requirements.

The proposed Digital Infrastructure Act, expected to be tabled later this year, will also introduce mandatory PUE standards for both new and existing facilities, increasing pressure on operators to improve efficiency through retrofits and optimization.

To support the transition, Singapore has extended the Infocomm Media Development Authority’s Energy Efficiency Grant until 2027, co-funding the purchase of approved energy-efficient IT equipment.

While Singapore remains a strategic digital hub, Knight Frank said growth opportunities are increasingly shifting to neighboring markets that offer greater development flexibility.

Meanwhile, Johor has evolved rapidly from being an overflow market serving Singapore into one of Southeast Asia’s largest institutional data center destinations.

The Malaysian state now has more than 1GW of live IT capacity, with larger land parcels and multi-building hyperscale campuses replacing standalone facilities as the preferred development model.

Knight Frank attributed Johor’s expansion to strong capital inflows from regional and global operators, supported by targeted government incentives, dedicated data center corridors and the Johor-Singapore Special Economic Zone (JS-SEZ).

The consultancy noted that Johor continues to benefit from lower land and electricity costs than Singapore, helping it maintain one of the region’s tightest colocation markets.

Johor’s colocation vacancy rate stands at just 0.7 percent, compared with 4.9 percent in Singapore, 20.5 percent in Jakarta and 23.3 percent in Bangkok.

However, Knight Frank warned that Johor’s cost advantage is gradually narrowing.

Malaysia revised its industrial electricity tariff structure last July under the Incentive-Based Regulation framework, raising base electricity rates and introducing fuel-cost adjustments through the Imbalance Cost Pass-Through mechanism.

Large power users such as data centers now typically fall under Ultra High Voltage time-of-use tariffs, where electricity charges range between 51.09 sen ($0.12) and 55.18 sen per kilowatt-hour, in addition to capacity and network charges.

For a 50MW data center, annual electricity costs could reach as much as MYR 260 million after factoring in both energy and demand charges.

Knight Frank said rising operating costs are expected to encourage greater investment in renewable energy and alternative power solutions as operators seek to manage long-term expenses.

Elsewhere in Southeast Asia, Indonesia is emerging as another major investment destination.

Greater Jakarta currently has 344MW of live IT capacity, with a further 329MW under construction and another 1.6GW already committed.

Operators have also secured enough land to support more than 2.3GW of future capacity.

Knight Frank said Jakarta’s live capacity is expected to more than triple by 2027, supported by strong demand from both American and Chinese cloud providers.

Google Cloud established its Jakarta region in 2020, followed by Amazon Web Services in 2021, while Microsoft opened its Indonesia Central region in 2025 as part of a $1.7 billion investment commitment.

Chinese technology companies Alibaba Cloud, Huawei Cloud and Tencent Cloud have also expanded aggressively, with Tencent committing a further $500 million to Indonesia by 2030.

Indonesia’s relatively low construction costs — estimated at between $10.5 million and $11.6 million per MW — together with abundant industrial land continue to attract large-scale investments.

More than 1.2GW of new projects were announced in 2025 alone, including Digital Edge’s $4.5 billion, 500MW campus in Bekasi and Princeton Digital Group’s $1 billion, 120MW facility.

Nevertheless, Knight Frank said concerns remain over potential oversupply in the colocation market, where 35 operators currently share only 267MW of live capacity. Grid reliability outside Java and Indonesia’s continued reliance on coal-fired electricity also pose long-term sustainability challenges.

Bangkok is also positioning itself as one of Asia-Pacific’s fastest-growing data center markets.

Knight Frank forecasts the Thai capital’s live IT capacity will rise from 122MW at the end of 2025 to 402MW by 2027.

Thailand’s Board of Investment approved 141 digital infrastructure projects worth 623 billion baht ($18.66 billion) in 2025, with most believed to be data centers.

Momentum has accelerated this year, with 48 projects worth 874 billion baht approved during the first quarter alone, already exceeding the total approved investment for all of 2025.

Much of the expansion is concentrated in the Eastern Economic Corridor, where industrial parks are increasingly being transformed into hyperscale data center campuses.

Major technology companies including Amazon Web Services, Google, DAMAC Digital and DayOne are all developing large facilities, while Thailand has introduced incentives including an eight-year corporate income tax exemption and a new 2GW Direct Power Purchase Agreement pilot allowing operators to procure renewable electricity directly from producers.

The Electricity Generating Authority of Thailand has also committed 31 billion baht to strengthen transmission infrastructure across the corridor.

Knight Frank said the policy framework, investment pipeline and hyperscaler commitments place Bangkok among Southeast Asia’s strongest growth markets, although future expansion will depend on whether power infrastructure, renewable energy procurement and project delivery can keep pace with rapidly rising demand.

Southeast Asia’s $30 billion data center boom is racing into a power wall