14 September 2020

Singapore Leads Southeast Asia in Data Centre Construction Despite Economic Contraction

Leading international construction consultancy, Linesight, has released its latest Southeast Asia construction industry findings, underlining the impact of COVID-19 and potential opportunities within the region. 

The ongoing pandemic continues to negatively impact supply chains and the construction industry in Singapore. According to Linesight’s Knowledge Centre findings, the economic situation remains damp as the regional GDP is expected to contract by 4.2% this year. 

Michael Murphy, Director at Linesight commented, 

“The economic climate across the region has been dampened by the pandemic. Just as other sectors, the construction industry has also been severely hit by the shutdowns and the economic contractions. However, the new normal has brought new opportunities for growth in the construction sector. For instance, the demand for data centres has peaked because of increased telecommuting and growing reliance on online interactions. The pandemic has also been a catalyst to embrace technology being used in the construction sector to bring about enhanced and more efficient working practices.”

Data centres have displayed resilience and strong growth potential. By 2025, the International Data Corporation (IDC) projects that the global need for data will skyrocket to 163 zettabytes. APAC is set to be the fastest growing region for data centres. It is further anticipated to house 47% of global data servers by the end of 2020. Pre-COVID, the data centre construction market in Singapore was already expanding, with heavy investment in the region, and this has been further accelerated with the onset of the global pandemic. Singapore’s government is presently working with telecom providers to further increase their buffers in anticipation of future requirements. Given the strength of Singapore’s existing infrastructure, the surge in demand has been welcomed. 

Increased automation is another positive factor arising from this period of crisis. The resourcing challenges have created a strong push for the adoption of technology. For instance, Singapore’s Housing Development Board (HDB) will take the lead in adopting DfMA (Design for Manufacture and Assembly) in their building projects, where 75% of all its units launched in 2020 will use methodologies such as Prefabricated Prefinished Volumetric Construction (PPVC) or Advanced Precast Concrete System (APCS). The transformation efforts have also led to the redesign or creation of new and better jobs, such as digital lead and DfMA production opportunities. 

Within Singapore, the public sector is expected to continue leading demand contributing S$16 billion to S$20 billion per year from 2021 to 2024 to help counter the overall economic climate. Overall, Singapore’s construction sector faces a slowdown in the short-term. Output growth, in real terms, is expected to decrease to 2.7% in 2020 and 0.5% in 2021, with the residential and commercial sectors particularly affected. The sector is further hindered by a slowdown in private projects, while businesses face fierce competition, tighter margins, and slow payments. Construction insolvencies are expected to increase by 5%.