Issue link: https://cp.revolio.com/i/584904
12 | THE DATA CENTER JOURNAL www.datacenterjournal.com center, such efforts tie up resources with- out yielding any return—and, in fact, they lose value owing to wear and deprecia- tion. ese results of a centrally planned economy hark to so-called bridges to nowhere and extremely low interest rates in the U.S., which tend to divert money in irrational ways that result in bubbles (booms) and subsequent busts. e hous- ing market was one such example. Worldwide, the growing debt prob- lem suggests that some kind of painful resolution must eventually arrive. e Economist pegs the current global debt at nearly $60 trillion, or over $8,000 per man, woman and child. at number may well be low on a GAAP (generally accepted ac- counting principles) basis, however, since by some estimates (e.g., Boston University economist Laurence Kotlikoff ) the true debt for the U.S. federal government alone is upwards of $200 trillion. Nevertheless, the economic rumblings in China could indicate some form of reckoning. e Shanghai Composite Index, for example, rose to almost 5,200 in June before dipping below 3,000 in late August—a nearly 45% drop (although still up year over year). Technology markets, however, have weathered economic troubles better than other industries in recent years. Rigby said, "China's recent currency devaluation is likely to weigh on investments and tour- ism in the region, given the nation's weight as a major investor and given that its citizens are a major tourist source market. Additionally, China is an important export market for the region, and its trading partners are feeling the impact through lower demand." Yet because real estate is less liquid than other assets, sudden eco- nomic shis—for instance, stock-market corrections—effects on this market will see a delay or a difference owing to various influencing factors. To illustrate on a small scale, an individual who loses a job is oen unable to immediately sell a primary residence. Furthermore, because of the typical length of time for such a transaction to take place, that person might in the meantime find a new job. e effect of the job loss on the individual's home ownership would thus be negligible. Dynamics on a larger scale are naturally more complex, but the illustration nevertheless applies. "e process of strategic review and acquisition results in an even longer decisions process for data centers," said Rigby. "erefore no longer-term impact has been seen in data center planned expansions." In the more highly developed market of Japan, one of the major questions is the (lack of ) success of "Abenomics"—es- sentially, money printing by the Japanese central bank. e analog in the U.S. is so- called quantitative easing by the Federal Reserve. Unfortunately, the results of these kinds of policies are oen bubbles, or a kind of faux economic stimulus that may appear in stocks or other asset classes. Whatever the case, Rigby suggests that the Japanese government "needs to push through vital reforms and progress, which has so far been slow. e inevitable chan- neling of funds to construction has had an impact on data center operators and end users wanting to enter or expand in Tokyo." Japan's already small size is further affected by its geography: the mountainous islands leave little room for development, so physical space comes at a premium. "A scarcity of land and available construction companies in Tokyo is further accentuated by the preparations for the 2020 Tokyo Olympics and rebuilding of Fukushima, further north," said Rigby. From the ongo- ing effort to resolve the Fukushima nuclear disaster following a tsunami in 2011 to a declining population and various eco- nomic uncertainties, Japan faces a number of questions that will no doubt affect its future. But it still remains a technology hub in the APAC region, so these issues may have little impact on the market for data center real estate in that country. concLusions Rigby summarized the Asia-Pacific region's prospects for data center real es- tate by noting that it "will continue to lead global economic growth and is expected to make further inroads towards narrow- ing the economic gap between the other developed regions." Part of this leveling is visible in the growing use of mobile devices such as smartphones in emerg- ing APAC markets. He added, "Relatively more-open data center markets such as Singapore and Hong Kong continue on a path of convergence to a more familiar model of the U.S. and EMEA. However, other data center markets in Asia Pacific such as China, India and Japan remain opaque and insular." Economic and geopolitical strains will no doubt remain in the headlines, raising some doubts regarding markets in the APAC region. Barring a widespread natural disaster or other catastrophic situation, technology markets will likely continue to develop, pulling data center real estate with them. For emerging APAC markets, that situation probably means continued growth as they converge with western nations in level of development. n Economic and geopolitical strains will no doubt remain in the headlines, raising some doubts regarding markets in the APAC region. Barring a widespread natural disaster or other catastrophic situation, technology markets will likely continue to develop, pulling data center real estate with them. For emerging APAC markets, that situation probably means continued growth as they converge with western nations in level of development.