Johor stays Malaysia’s data centre powerhouse as AI demand surges, BMI says

KUALA LUMPUR, Oct 9 — Malaysia's data centre market is evolving to cater to higher-value, artificial intelligence (AI) focused deployments, with Johor continuing to serve as the country's leading hub despite increasing power constraints, according to BMI, a division of Fitch Solutions. The nation currently boasts 125 data centre facilities, featuring 925.6 megawatts (MW) of operational capacity, 2.0 gigawatts (GW) under construction, and a projected pipeline of 3.1 GW, largely centered in Johor.

The surge in market growth was initially ignited by Johor's strategic proximity to power-strapped Singapore, but has since expanded due to a multitude of factors, including hyperscaler commitments, domestic enterprise workloads, the surge in cloud adoption, and policy initiatives under the MyDigital blueprint.

Since 2024, substantial AI-focused proposals have secured approvals, steering the market towards capital-intensive and high-value deployments orchestrated by private-equity-backed platforms like DayOne, AirTrunk, Bridge DC, and Yondr. While power remains the principal bottleneck, grid bottlenecks, new tariffs above 100 MW, and stricter sustainability screening have heightened execution risk and spurred diversification into neighboring countries such as Thailand and Vietnam.

Johor is projected to maintain its dominant position as Malaysia's primary data centre hub, with a combined pipeline of 4.1 GW, surpassing other significant submarkets like Kuala Lumpur and Cyberjaya, which offer 104 MW and 850 MW, respectively. The surge in demand from Singapore, coupled with its escalating lease prices, has prompted data centre operators to broaden their operations into neighbouring markets such as Johor and Batam, Indonesia, in an effort to meet regional requirements.

In the near future, BMI anticipates that additional data centre platforms operating within Asia will consolidate their presence in established hubs like Johor while simultaneously diversifying into other markets to minimize country-specific risks. Singapore remains a crucial driver of demand for Johor, given the strong economic ties and the capacity of Malaysian facilities to serve regional clients.