Previously, overlooked in comparison to other primary Tier 1 data centre markets across Asia Pacific, the South Korea (Seoul) market is now gaining international entrants in the form of major US-based data centre REITs, which have driven growth in the market since 2021. Demand is also very high from the global cloud service providers whose deployments are currently solely through colocation.
In addition to existing operators, global data operators, financial investors, and domestic construction companies will flow in, which is expected to change the business structure centred on existing telecommunication companies such as KT, LG U+ and SK Broadband. The local market dominance of telcos has historically posed issues with carrier neutrality, but this may potentially be resolved by the entry of multinationals such as Equinix, Digital Realty, Digital Edge and Stack Infrastructure who have announced significantly sized projects that will go live from 2024 to 2025 onwards. However, local cloud services such as Naver, Kakao and NHN, and financial institutions are constructing self-builds for their own use, which will reduce their share of demand in the colocation market.
Land near available power is increasingly scarce across the central Seoul CBD area, with multi-level builds required due to smaller parcel sizes and cost. Due to power shortages, KEPCO will not reserve power for future phases and operators will have to pay a minimum fee for the entire amount of contracted supply regardless of whether the data centre will be developed in phases or not. Land costs in Seongnam and Gangnam can be up to three times higher than land prices in Gyeonggi and Incheon, which is increasingly becoming locations of interest due to land/parcel availability and power supply.
Locations north of the Han River such as Paju, are considered attractive due to more cost-effective land prices, land availability and power connections, however, international investors have shown an apprehension due to closer proximity the DMZ and have favoured the Incheon area to capture hyperscale demand.