Hong Kong is one of the fastest growing data center markets in APAC. But there’s a couple of clouds over its future: the territory relies on electricity from a grid which has no immediate prospect of shifting to renewables; and its political tensions regularly make international headlines.

Where does that leave operators in the region? If Raymond Tong, CEO of Hong Kong’s largest data center company Sunevision is an indication, we’d say they are remarkably positive.

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Hong Kong’s special status

The Hong Kong data center market accounted for 54 percent of the APAC data center investment in the first half of 2020, according to Cushman and Wakefield. By the end of the first quarter of 2021, it already had a total of more than eight million square feet of data center space,

Cushman and Wakefield predict another four million square feet of data center space will be supplied by 2025.

Part of Hong Kong’s draw is connection, but there’s a lot more to it, Tong tells us: “There are 13 intra-Asia subsea cables, and 11 of these land in Hong Kong” Raymond Tong said in a frank and friendly phone interview. “Hong Kong is geographically the center of Asia.”

Besides the geography and the fiber, Hong Kong has been a gateway to China, so many corporations place their headquarters there.

No enterprise can ignore the Chinese market, but they cannot enter it freely. As a former colony that has become a “special administrative region” of China, the region has been a bridge between the two systems: one where the local democracy makes Western businesses feel at home - although increasing Chinese administrative control has threatened this balance, and sparked recent protests.

There are more than 20 service providers and more than 40 data centers, with AWS, Facebook, Google, and Alibaba Cloud all present in some form.

Veteran player

Tong speaks so knowledgeably about the local data center scene, it’s a surprise to find he’s a newcomer to it. He ran various local food and beverage companies before 2018, when he was appointed CEO of Sunevision.

By contrast, Sunevision is a veteran player, dating back to 2000, when Hong Kong’s largest property developer, Sun Hung Kai Properties Limited, saw the opportunity in the first Internet boom in 2000.

“When subsea cables started arriving, Hong Kong was strategically located in Asia,” Tong says. Firms arrived in the region, “looking for space for racks.”

Sunevision listed on the Hong Kong Stock Exchange in 2000, and quickly opened a most unusual data center. In a world where most data centers are one or two stories high, Mega-i is a towering 30 story building on Hong Kong island, designed to house over 4,000 racks with a total gross floor space of more than 350,000 square feet.

It’s not only one of the oldest purpose-built data centers still going, it’s also one of the largest.

The company was one of the rare dotcom babies to be unfazed by the dotcom crash. “The data center business continued to grow,” says Tong. New floors opened in Mega-i as each one was filled, and then other buildings were added: “Today, we have five buildings.”

Originally founded for more general tech property development, Sunevision has focused on data centers, while other parts of the business have “faded away.” The company is 75 percent owned by the major shareholder, with the rest floated in that IPO.

Cables land in neutral space

Starting as a property company helped Sunevision in two major ways. Obviously, finding viable space in the crowded Hong Kong region takes deep knowledge, but another factor is Sunevision’s status in telecoms.

“We are carrier neutral. Other data centers in Hong Kong are mostly owned by telcos, and other telcos hesitate to land their cables in those data centers. Of the 11 subsea cables landing in Hong Kong, nine terminate in Mega-i.”

Alongside Mega-i, the company has Mega Two, in the Fo Tan neighborhood, with 429,000 sq ft of space, One, a 20,000 sq ft facility in Kwun Tong, and Jumbo, 120,000 sq ft space in Tsuen Wan.

Some three years ago, it launched Mega Plus, a high-tier greenfield site in Tseung Kwan O, aimed at cloud players, which has a 474,000 sq ft development.

That gives it a total of around 70MW.

“We had accumulated enough experience to acquire a piece of land to build a data center for hyperscaler customers, the US and Chinese cloud guys,” explains Tong. “We can offer 5MW, 10MW, or 20MW. Hyperscalers really move the needle.”

The Mega Plus development is now close to being fully occupied, and Sunevision is looking at further expansion. The 20MW Mega Gateway is due to open in 2022, as is the 180MW Mega IDC. It’s also announced plans for an eighth site, 10MW in a converted warehouse.

As well as being carrier-neutral, the facilities are cloud-neutral, allowing on-ramps to all the major providers.

These factors helped the company to its leading position. It has some 30 percent of the space, closely followed by the communications company PCCW - a company which Tong points out, “cannot be carrier-neutral.” However, PCCW's data center business has now been sold to DigitalBridge, and wrapped under the Vantage brand.

He’s equally confident in a contest with the world colocation leader Equinix: “In Hong Kong, Equinix is a very respectable partner.” Equinix is also a close neighbor: its HK1, HK2, and HK3 facilities are close to Sunevision’s Jumbo, HK4 is near Mega 2, and HK5 is in the Tseung Kwan O business park next to Mega Plus. Public information suggests Sunevision has more cross-connects than Equinix.

Recycle buildings

Unlike operators in less developed areas, Sunevision builds most of its facilities in converted industrial or commercial buildings. That’s an environmentally sound decision, and one that is also a response to rules from the authorities driven by the very limited availability of land in Hong Kong.

Hong Kong has a large number of old industrial estates, left abandoned as traditional manufacturing moves elsewhere. The administration is reportedly very much in favor of converting these into data centers, as long as they are upgraded to meet the needs for electric power and floor loading.

Reusing the building reduces some costs and cuts waste, but there’s a bigger reason: time. “If you tear it down, it will take another four to five years. If you know what you want, you can change it.”

Stay local

Two things normally happen to strong local providers: they either attempt to expand beyond their borders, or else they sell to a bigger player like Equinix or DRT, in order to achieve that expansion. Sunevision doesn’t plan on either, says Tong.

“In Hong Kong, we enjoy our core competency,” he says, listing out skills in land acquisition, design know-how, and a knowledge of how to work with local government. “We’ve been serving customers in Hong Kong for 21 years. We have an end-to-end core competence.”

The region gives Sunevision all the expansion it needs, though some customers have offered to be an anchor tenant if the company expanded elsewhere in Asia or greater China: “We don’t expand for the sake of expanding.”

As to selling up: “We are not for sale. That’s exactly why hyperscalers want to work with us,” Privately owned data center operators are rare, but Sunevision is effectively controlled by Raymond Kwok, the chair of Sun Hung Kai Properties, a member of one of Asia’s wealthiest families, and someone who sees a future in data centers.

A big part of that future is as a partner to hyperscalers, says Tong, as building in Hong Kong is a commitment: “From acquisition to final approval, any project takes four to five years.”

That’s a big contrast to underdeveloped areas in the US or China where buildings can go up in a matter of months - but with a lot of competition on price: “We look at our friends in China operating data centers, and I don’t think any are in net-positive profit territory.”

By contrast, Sunevision has a healthy balance sheet, partly because Hong Kong data center space is at a premium.

Living on Hong Kong’s fossil grid

As well as land, power must be an issue - and renewable energy is intractable in Hong Kong.

Tong declined to say much directly, but the Hong Kong grid is heavily regulated, with two monopoly players. Hong Kong Electric serves the island where Mega-i is located, while CLP serves the rest of the “New Territory,” where Sunevision’s other facilities are.

In a controlled economy any major project such as a new data center, which might require a new substation, needs government approval.

But there’s a potential issue here. Hong Kong has very little renewable energy. There are some renewable energy certificates (RECs) but they cost 50 percent more than the regular tariff.

And funding renewable projects through power purchase agreements (PPAs) as happens elsewhere in the world, is simply forbidden in Hong Kong.

Tong says he supports moves to get more renewable energy on the grid, which will bring the price down and break the chicken-and-egg situation.

But China currently has a weak plan on decarbonization, and the Hong Kong administration echoes this. Chief executive Carrie Lam has promised Hong Kong will be carbon neutral by 2050, a goal which environmentalists judge to be too slow to meet the needs of the planet - and not realistically achievable with the tools available.

The Chinese government has said China’s emissions will continue to grow till 2030, then decline. Although CLP has 50 percent natural gas generation, Hong Kong’s electricity is still heavily dependent on coal - the most polluting fossil fuel, which the UN’s Intergovernmental panel on Climate Change (IPCC) says must change - and fast.

“There must be no new coal plants built after 2021,” UN Secretary-General António Guterres said in response to the latest IPCC report. “This report must sound a death knell for coal and fossil fuels, before they destroy our planet.”

China doesn’t currently plan to adopt that suggestion. It’s still building coal plants within its borders, though it has said it will eventually stop building coal plants for other countries.

It’s not yet clear whether China will even attend the COP26 climate change summit, but if it agrees to any more binding commitments there, it could have an impact on anything which increases the load on Hong Kong’s fossil grid.

One logical idea could be some kind of pause in data center building - at least until more renewable energy can be delivered. There’s absolutely no sign of such a move at present, but other cities such as Amsterdam and Singapore have applied a moratorium, faced with a less drastic crisis in space and energy.


Tong isn’t apparently worried by such a prospect. He’s also not concerned with political instability, which has drawn the attention of media around the world.

“We’ve been blessed,” he says of Hong Kong’s “one country, two systems” approach. “Hong Kong has flourished since the British handover to China. For my team and myself, we still believe in Hong Kong in a big way.”

Last year, Hong Kong implemented aggressive security laws written by Beijing policymakers.

The new National Security Law grants significant powers to Chinese authorities to help them combat vague national security threats, including criminalizing seeking to “split” Hong Kong from China, or “colluding” with “external forces” to spy on China. Such crimes could lead to life imprisonment - possibly in labor camps. National security suspects can be detained for six months before they are charged, and trials can happen behind closed doors.

Beijing has the power to interpret the law, rather than Hong Kong officials.

In particular, the law states (translated) that "when the Hong Kong Special Administrative Region Police Service maintains the national security department to handle crimes against the national security, it may take various measures...[including] interception of communications and covert surveillance of persons who have reasonable grounds to suspect involvement in crimes against national security."

One stabilizing factor is the way Hong Kong is embedded in the world economy, through the international framework of legal accounting and privacy rules - and those 11 subsea cables.

Of course, the last year has seen some difficulties on the cable runs, as US companies like Facebook have pulled out of cables terminating in Hong Kong, because of US fears of Chinese surveillance.

Tong says the data still gets through, but has to shift to cables in Taiwan or the Philippines: “It was initially a direct flight, but it has become a transit flight that stops in the Philippines en route to Hong Kong. That’s not ideal for sure, there are latency issues.”

He believes the basic need for data to get through will ensure the situation works out: “Politics can change tomorrow. There are now more intra-Asia cables coming into Hong Kong. Data needs to hop somewhere, and Hong Kong is in demand. If direct flights cannot be done, regional flights will be more frequent.”

It could even be an opportunity for new landing stations for regional cables, he told us. “A year ago we acquired land and will build a cable landing station.“