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Determine the Hurdle Rate for the Development of Data Center Colocation in Asia Pacific Region

 

FEATURED PAPER

By Nalasendja Muhammad

Indonesia & Singapore

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Abstract

This paper is developed to determine the range of proper hurdle rate or Minimum Attractive Rate of Return (MARR) to be used for Data Center Colocation Project in some countries in Asia Pacific region by using Weighted Average Cost of Capital (WACC) as a floor base.

The author will also demonstrates how to determine the risk scoring range covers the types of construction, project location, power and cooling infrastructure utilization to be added into the MARR computation by using the Analytical Hierarchy Process (AHP). The paper concludes that range of 6.16% to 19.15% covers most conditions.

Keywords: Cost of capital, CAPM, WACC, hurdle rate, MARR, AHP, project risk

  1. Introduction

1.1   Data Center Colocation in Asia Pacific RegionThe data center colocation market in Asia Pacific region continues growing. This growth is expected to continue as an impact the growth of digital economic.

There are many data center enterprise from North America are driving up their presence in Asia-Pacific (APAC) region. Right now, there are 406 colocation data centers in the APAC market spread over 10 major countries. India boasts the highest concentration with 97 data centers, followed by Australia with 54 data centers while China, Hong Kong and Japan round out the top five, with 54, 40 and 38 data centers, respectively.The APAC data center market is growing rapidly, but the data center provider is still catching up to meet the demand of high quality facilities.

On the next few years, the APAC data center colocation market will be expanding as more global data center operators establish their bases in the region to challenge the current market.

More…

To read entire paper (click here)


 

About the Author

pmwj33-Apr2015-Muhammad-PHOTO

Nalasendja Muhammad, AMD, CCP

Indonesia & Singapore

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Nalasendja Muhammad
is a data center construction professional with 12 years of experiences in project management and cost engineering. He is currently a Quantity Surveyor at Equinix Asia Pacific in Singapore. Nala holds a diploma in Mechanical Engineering majoring in Refrigeration and Air Conditioning Engineering from Politeknik Negeri Bandung (Polban). He is a Certified Cost Professional (CCP) and member of AACE International. He is driven by passion to share contribution in data center sector. He lives in Batam, Indonesia and can be contacted at [email protected]