Singapore’s capacity constraints is expected to steer data center growth to Malaysia, Fitch Ratings said on Wednesday.
The rating agency said in a note that Singapore’s provisional award of 200 megawatts (MW) of new data center capacity falls well short of the capacity sought by competing proposals under the country’s Data Centre – Call for Application initiative.
Fitch expects much of the unmet demand to shift to the Malaysian state of Johor, reinforcing its view that infrastructure availability, rather than demand, will increasingly shape growth in the Singapore-Johor corridor.
According to the statement, the corridor illustrates a broader regional shift, with infrastructure rather than demand setting the pace of growth as computing needs surge.
Much of the announced capacity in Asia Pacific (APAC) is still at the planning stage, as project delivery hinges on utility connections, land availability, permitting, financing and equipment supply.
From a credit perspective, high entry barriers, low vacancy rates and strong spillover demand support existing assets, particularly those with strong connectivity and expansion optionality.
However, new supply faces higher completion risk, as power availability, grid upgrades, equipment lead times and sustainability requirements become more binding constraints.
“We expect this to favor operators, landlords and infrastructure providers with secured utility access, established customer relationships and proven delivery capabilities, while speculative developments are vulnerable to delays, cost inflation and regulatory change,” said Fitch.
According to the note, Singapore ranks among APAC’s most attractive digital infrastructure markets, but developers are becoming more selective. Power availability and stricter sustainability standards are influencing where and how capacity is built, while land scarcity is concentrating development in designated locations.
These factors raise entry barriers and slow supply responsiveness. CBRE estimates occupancy above 95 percent in the first half of 2026.
“We forecast tight market conditions for the remainder of 2026, despite additional capacity approvals, given rapid absorption and long lead times，
“These conditions should continue to favor existing operators, given limited available capacity and long lead times for new supply，” said Fitch.
Fitch also noted that Singapore’s supply constraints are pushing demand to nearby markets, with Johor the clearest beneficiary.
The state offers proximity, lower development costs and closer integration through the Johor-Singapore Special Economic Zone.
Operational information technology (IT) capacity in Johor reached 1,110MW in 1H26, according to Cushman & Wakefield, with a further 602MW under construction and 2,486MW planned.
While colocation vacancy fell to 0.7 percent, indicating strong absorption of existing capacity, Johor retains a substantial development pipeline to accommodate further growth.
However, Fitch noted that Johor’s ability to sustain this momentum will depend on resource management and infrastructure delivery.
It noted Malaysian authorities have tightened requirements around power efficiency, water use and renewable-energy adoption as the market scales.
These measures may moderate the pace of capacity additions and lift development costs, but they should also buoy the market’s long-term resilience and sustainability by imposing greater discipline on project development.
“Demand fundamentals across the corridor remain favorable. Cloud adoption, enterprise digitalization and artificial intelligence (AI)-related workloads continue to support capacity expansion, although the timing and location of new development will increasingly depend on infrastructure availability and project execution,” said Fitch.
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