As artificial intelligence (AI) spreads and demand for data centers rises quickly, a forecast has emerged that the scarcity of high-quality data center asset in Korea will grow as power supply constraints and development regulations intersect. Analysts said that as global investors show greater interest in assets with locations that have available power supply capacity and strong tenants, opportunities for investment exits could also expand.
According to the report "Korea data center investment: diagnosing the scarcity premium created by supply constraints and exit potential," published on the 13th by CBRE Korea, a global commercial real estate services corporations, the value of existing high-quality asset in the domestic data center market is becoming more pronounced as AI demand expands and power supply constraints intersect.
The report cited power supply as the biggest variable for new data center development. In the Korea Electric Power Corporation's power system impact assessment for the greater Seoul area, 522 technical reviews were filed through March this year, but only 10 projects won final supply approval. With the final approval rate at just 1.9% of total applications, new supply is difficult. For this reason, it projected that the scarcity of asset that have already secured available power supply capacity will grow further.
Demand is steadily expanding. Although data center supply in the greater Seoul area is expected to exceed 1,450 MW by 2028, the market is being reorganized into a "power-following" structure in which development is determined more by the availability of power supply than by location. Currently, the vacancy rate for data centers in the greater Seoul area remains below 5%, and with more pre-leasing before completion, a significant portion of supply is being absorbed before it even reaches the market, the report said.
Leasing demand is also solid. Global cloud service providers (CSPs) and large domestic IT corporations account for about 88% of total leasing demand, and the market base is expected to expand further if demand from financial institutions' AI transitions, public and sovereign AI, and large corporations' AI transitions (AX) is added.
In the investment market, the exit environment is also expected to improve, centered on high-quality asset. In CBRE Korea's investor survey this year, 88% of domestic investors expected data center asset prices to rise.
The report projected that as global infrastructure funds and data center-focused investors increase their investments in Korea, the pool of buyers will diversify around asset that have locations with available power supply capacity and strong tenants, and exit routes will also expand. However, it added that since domestic data center cap rates have already fallen to levels similar to major Asian markets, factors such as lease structures and operating methods, and the risk of technological obsolescence from AI server upgrades should be considered together.
Choi Soo-hye, executive director and head of research at CBRE Korea, said, "Korea's data center market is at a turning point where investment appeal and exit potential are growing together as global AI demand expands, supply is constrained, and capital flows in," and added, "However, because data centers are an asset where technology changes quickly, an investment strategy that comprehensively considers lease structures, renewal potential, and facility upgrade expense is necessary."