The data centre colocation market in Hong Kong is set to grow at an annual compound rate of 16%, reaching $1.5 billion (approx. £1.2 billion) by 2021, according to new research.

The report released by Structure Research found that the Hong Kong colocation market generated an estimated $706 million (approx. £543 million) in 2016, and is projected to grow 17% year-on-year in 2017.

The study suggests that the demand for data centre colocation space in Hong Kong is primarily driven by mainland Chinese cloud and technology firms looking to expand internationally.

‘Mainland Chinese customers will continue to be a primary driver for the foreseeable future as telecom, content and cloud providers use Hong Kong as a jumping point to the wider Asia-pacific region,’ the report notes.

Hong Kong’s springboard location is also a particular draw for U.S.-based cloud providers and tech giants looking for a foothold in Asia.

However, despite the growth trajectory remaining steady, the analysts foresee a slight downturn over the next five years as the scarcity of land in Hong Kong makes it difficult for companies to find space for data centre development.

‘Hong Kong does face some medium-termm challenges that could potentially dampen the current data centre market growth trajectory. Land for new data centre builds continues to be scarce with only two available plots of land set aside for future development…’ commented Jabez Tan, research director of data centres at Structure Research.

The report data predicts that the Hong Kong data centre market will be evenly split between retail and wholesale by 2021. It further suggests that a growth in local industries such as financial services, and a developing start-up culture, will also contribute to future growth.

According to the research, NTT Communications and Equinix are currently the leading data centre providers in Hong Kong, with a combined market share of 43%. Other top data centre providers in the region include SUNeVision (iAdvantage), PCCW Solutions, HKCOLO, Digital Realty Trust, Global Switch and iTech Towers.

Looking at the year ahead, there are two new data centres set to come online in Hong Kong – totalling over 62 MW of potential critical IT load capacity within the popular industrial area of Tseung Kwan O (TKO).