Singapore’s low data centre rate to propel demand in Johor

PETALING JAYA: Malaysia’s data centre (DC) hub in Johor is set to benefit from unmet demand in Singapore, as the city-state’s provisional award of just 200 megawatts (MW) of new DC capacity falls well short of what is sought by competing proposals.

According to Fitch Ratings, it is infrastructure availability that will shape growth in the Singapore-Johor corridor rather than demand.

“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 is still at the planning stage, as project delivery hinges on utility connections, land availability, permitting, financing and equipment supply,” the credit rating agency said.

Johor offers proximity, lower development costs and closer integration through the Johor-Singapore Special Economic Zone.

Commercial real estate services firm Cushman & Wakefield pointed out that for the first half of 2026, operational IT capacity in Johor reached 1,110MW with a further 602MW under construction and 2,486MW planned.

“While colocation vacancy fell to 0.7%, indicating strong absorption of existing capacity, Johor retains a substantial development pipeline to accommodate further growth,” the rating agency said.

Currently, Singapore has 25MW of DC’s under construction.

Another comparison by Fitch shows that planned capacity for Singapore is 207MW – Malaysia is more than 12 times that at 2,486MW.

However, Fitch noted that for Johor to sustain this momentum, proper resource management and infrastructure delivery remain vital factors.

“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,” it said.

On a credit perspective, Fitch said high entry barriers, low vacancy rates and strong spillover demand support existing assets, particularly those with strong connectivity and expansion optionality.

However, new DCs face greater completion risks as power availability, grid upgrades, equipment lead times and sustainability requirements become increasingly binding constraints.

This is likely to favour operators, landlords and infrastructure providers with secured utility access, established customer relationships and proven delivery capabilities, while speculative projects could face delays, higher costs and regulatory changes.

Meanwhile, Moody’s Ratings said that AI will have an uneven credit implication for the Asia-Pacific region except China.

It noted the region holds strategic positions in semiconductors, memory, DCs, critical minerals and power infrastructure.

“As AI adoption deepens, credit effects will depend on whether investment converts into recurring cash flow, how AI pricing economics evolve and how regulatory and cybersecurity risks shape adoption,” the credit rating company stated in a report.

There are two factors that influence the credit impact of AI for companies – economics of AI adoption will vary by use case, sector and provider, and deployment remains operationally complex.