The artificial intelligence (AI) boom is fueling demand for data centers everywhere. Big tech companies like Amazon, Google and Meta have been rapidly building data centers to keep up with the surge in computing power - storing, transmitting and processing big data in the era of generative AI requires advanced data centers that can support massive workloads.
The business of data centers is also gaining momentum in South Korea. “Korea is rapidly emerging as one of the key data center markets in the Asia Pacific, thanks largely to its conducive business environment and location,” said John Pritchard, head of Tenant Advisory Group at Cushman & Wakefield Korea.
Korea is currently the sixth largest market for data centers in the Asia Pacific region, with 591 megawatts (MW) in operation as of 2023, according to data from Cushman & Wakefield. “In the next five to seven years, Korea will likely overtake Singapore as the fifth largest market in the region,” Pritchard said in an interview with The Chosun Daily on April 9.
“Based on the current development pipeline, Korea has the potential to reach 1,485 MW in operational capacity in a few years, which is higher than the 1,307 MW expected for Singapore.”
He pointed to the growth of AI and machine learning, the widespread adoption of cloud computing, and disaster recovery as the three main drivers behind the country’s data center market. “Korea is home to leading technology companies such as Samsung and LG, hosts a strong finance industry, and a growing international and domestic cloud market,” he added.
Local tech giants and telecommunication operators have been constructing data centers for their own use. Naver unveiled its second in-house data center, Gak Sejong, last November. Kakao’s first data center, Kakao Data Center Ansan, began operation in the first quarter of this year. Mobile network operator LG Uplus completed the construction of its second hyperscale data center in Anyang, Gyeonggi Province, last October.
Colocation data centers, which offer data center space to multiple businesses, are also on the rise in Korea. Global colocation providers, such as Equinix, Digital Realty, Digital Edge, and Stack Infrastructure, have revealed data center projects that will go live in the next few years. The total number of data centers in Korea rose from 162 in 2021 to 187 in 2022, up 15.4% in a year, according to the Korea Data Center Council.
A typical data center requires land, space, proximity to city centers for high efficiency, access to robust power supply and stable grid networks, and effective cooling systems to maintain the servers at optimal temperatures. Based on these criteria, demand for data centers tends to be concentrated in big cities with large populations.
Currently, the Greater Seoul area, encompassing Seoul, Gyeonggi Province and Incheon, accounts for 77% of the country’s data center market as of the second half of last year. Pritchard noted that data center operators seek sites near central locations to minimize data transmission delays and be closer to their customer base. “Sites close to business districts are expected to perform well and command higher rates,” he said.
But the influx of new data centers has raised concerns about the country’s power usage. “Power demand is rising, and supply is looking to keep up, but extensive upgrades to the grid are necessary to accommodate the transmission of the increased power demand and secure the grid,” Prichard said. “Delays to projects such as the ShinSiheung & ShinSongdo transmission line have the potential to cause delays to local data center projects.”
Korea’s heavy reliance on imported power, which accounts for 97% of its supply, and lack of land power interconnections also pose challenges to the power grid as electricity usage is set to surge in the future. The growth of power-intensive sectors like memory chips, as seen in Samsung Electronics and SK Hynix’s plans to build a semiconductor mega cluster in Hwaseong, is also expected to strain power grids, Pritchard added.
In response, the government recently announced decentralization measures, including plans for a 1-gigawatt (GW) data center cluster in the eastern Gangwon Province. Pritchard predicted that the government’s efforts may lead to an increased supply of regional data centers. “As the key hub for submarine cable landing stations in South Korea, Busan offers a unique value proposition for global connectivity and has great potential to be a data center hub,” he explained.
While data center demand in Seoul is projected to stay high for the foreseeable future, he said the uncertainty surrounding the country’s power supply and high costs associated with developing data centers could lead to a slowdown in growth over the decade. Cushman & Wakefield identified Korea as the most expensive market for data center development in the Asia Pacific, with costs ranging from $7.2 million to $15.4 million per MW for construction.
“Finding sites capable of hosting large IT load capacities in these central locations, such as Gangnam, is increasingly challenging due to limited land availability, power, competing land uses such as commercial and residential, plus zoning and regulatory limitations,” he said.
These constraints have driven up the value for data center sites within Central Seoul, such as Empyrion Digital’s upcoming KR1 Gangnam Data Center, which is currently under construction. When completed in the first quarter of 2025, it will provide 40MW of power in one of Seoul’s key business districts.
