Rapid Increase in Data Demand for AI and Cloud Industry Development
Construction Market Worth 14 to 17 Trillion Won Expected Over the Next Four Years
With the development of generative artificial intelligence (AI) and the cloud industry, domestic demand for data centers is expected to surge, prompting the real estate industry to actively invest. In particular, optimistic market forecasts have led real estate asset management companies to spearhead development projects one after another.
According to the real estate industry on the 26th, Koramco Asset Management is developing an IDC (Internet Data Center) in Gasan-dong, Seoul, with an investment of 480 billion KRW. This data center will have a total floor area of 41,213㎡, spanning from three basement floors to 11 above-ground floors. It is scheduled for completion in July 2026.
Pacific Asset Management is developing the Yongin Jukjeon IDC through investments including the Canada Pension Plan Investment Board (CPPIB). The total project cost reaches 480 billion KRW, with completion targeted for 2025. Aegis Asset Management is also developing a large data center in Pungsan-dong, Hanam, while construction companies such as GS Construction, SK Ecoplant, and HDC Hyundai Development are either developing or planning to develop data centers.
Movements by overseas major investors are also active. Foreign financial institutions such as the Government of Singapore Investment Corporation (GIC), Actis, and BlackRock are entering the domestic data center market by partnering with Korean companies or acquiring stakes and land in existing data centers.
The recent corporate interest in data center development stems from expectations of a sharp increase in demand due to the advancement of generative AI and the cloud industry. According to the Data Center Energy Efficiency Association, the number of commercial data centers in Korea is currently 40, with an additional 34 expected to be supplied by 2027. Investment per project ranges from 400 billion to 500 billion KRW, opening a construction market worth 14 to 17 trillion KRW over the next four years.
Another reason for corporate interest is that data centers have yet to establish themselves as investment assets in Korea. In Korea, most data centers have been developed and operated directly by telecommunications companies or IT firms that process and store data. However, overseas markets are segmented into data center investment companies, operators, and end users (tenants), with active transactions similar to office buildings or logistics centers.
In Korea, the IDC in Seongnam, Gyeonggi Province, was sold in October 2020, and the Seoul Guro data center was sold in 2018, representing the most recent transaction cases. Since the development and trading market is not yet fully formed, companies expect to benefit from early market entry.
However, obstacles such as electricity supply regulations, securing land, resident complaints, and high construction costs are hindering development projects. There is also a shortage of specialized personnel for data center operations.
Ryu Gang-min, head of the research center at RSquare, a comprehensive commercial real estate service company, said, "Domestic data center development is only possible in some uses such as broadcasting and communication facilities or knowledge industry centers, and smooth power supply is required during operation, limiting development to certain areas." He added, "Technological advances allow more data to be stored in limited space, which could have a 'negative externality' on data center rental demand, and cloud services also face security issues, which may change the market environment."
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