Business · World News Bureau

Singapore's squeeze, Johor's boom: power, not demand, is the limit

Singapore rationed new data centre capacity, and operators expanded across the causeway into Johor. Now analysts say the real limit on Southeast Asia's fastest-growing data centre hub is grid connections and water, not demand.

LSN World News · 18 October 2026

Singapore's squeeze, Johor's boom: power, not demand, is the limit

<p><em>Special Reporting from LSN News, adapted from today's Asia Behind the Headlines episode. <a href="https://youtu.be/h-xTlNlno_A" target="_blank" rel="noopener">Watch the video on YouTube.</a></em></p>

<p>"Power remains the binding constraint." That was the assessment of BMI, a unit of Fitch Solutions, in a note on Malaysia's data centre market on 9 October. BMI said Johor, across the causeway from Singapore, would remain Malaysia's dominant data centre hub, with a combined pipeline of 4.1 gigawatts. But it warned that grid bottlenecks, new tariffs above 100 megawatts and stricter sustainability screening are raising execution risk and encouraging diversification into Thailand and Vietnam.</p>

<h2>Singapore rations, Johor builds</h2>

<p>Singapore informed the industry of a temporary pause in the growth of data centres in 2019 and began a review, describing them as intensive users of land, water and energy. The pause was lifted in 2022. Since then, new capacity has been released through competitive rounds. A pilot round in 2023 provisionally awarded about 80 megawatts. On 21 August this year, the Economic Development Board and the Infocomm Media Development Authority provisionally allocated 200 megawatts to four operators, Digital Realty, Equinix, Keppel Data Centres and ST Telemedia Global Data Centres, at 50 megawatts each, out of more than 20 proposals. All four will locate on Jurong Island.</p>

<p>BMI said Singapore's limited supply and rising lease prices had encouraged operators to expand into neighbouring markets, including Johor and Batam in Indonesia. According to Cushman & Wakefield figures cited by The Star, operational IT capacity in Johor reached 1,110 megawatts in the first half of 2026, with a further 602 megawatts under construction and 2,486 megawatts planned. Fitch Ratings said colocation vacancy had fallen to 0.7%. By comparison, Singapore had 25 megawatts under construction and 207 megawatts planned.</p>

<p>Capital is still arriving. On 13 October, a consortium of seven lenders said financing for DayOne's Johor data centre platform had been expanded by RM15 billion, taking the total to RM30 billion. Princeton Digital Group is reportedly seeking a loan of up to US$1.2 billion to fund a 198.8-megawatt Johor campus and refinance debt, according to a Bloomberg report cited by EdgeProp. Malaysia's Digital Ministry said this week that 16 of the 27 projects approved under its Data Centre Task Force up to July 2026 are in Johor.</p>

<h2>The grid is the bottleneck</h2>

<p>In a June report, Wood Mackenzie forecast that data centres could account for around 40% of Johor's end-user electricity consumption by 2035, up from about 24%. It estimated data centre maximum demand in the state at about 3.8 gigawatts, against roughly 6.8 gigawatts of installed generation and current demand of about 2.6 gigawatts.</p>

<p>Generation, it found, is not the immediate problem. "The issue is increasingly about where power is available rather than whether it is available," said Alvin Tan, a research analyst for power and renewables at Wood Mackenzie. Demand is concentrated around clusters such as Sedenak Tech Park and Nusajaya Tech Park, and substations and grid connection points are becoming key bottlenecks for developers, including shortages of 132 kV main intake substations. About 2.1 gigawatts of Johor's coal-fired capacity is expected to retire in the mid-2030s.</p>

<h2>Water is the other limit</h2>

<p>Johor has set a water usage efficiency threshold below 1.8 for new data centres, the same standard applied in Singapore, state executive councillor Mohamad Fazli Mohamad Salleh said in January, adding that approval still depends on the adequacy of the available water supply. Some operators have been required to use reclaimed water. In March, Menteri Besar Onn Hafiz Ghazi said the state would only approve Tier 3 and Tier 4 data centres that use air cooling. "If a data centre demands a high intake of water, we will not approve it," he said.</p>

<p>Our read (analysis): demand is not Johor's problem. Fitch has said infrastructure, rather than demand, is setting the pace of growth in the Singapore-Johor corridor, and that conditions are likely to favour operators with secured utility access. That suggests the winners will be the operators that already hold power and water, not those with the largest announced pipelines. Singapore chose to ration its data centre capacity. The question for Johor is whether its grid and water planning can keep up with the projects already heading its way.</p>

<h2>Sources</h2>

<ul>

<li><a href="https://www.malaymail.com/news/money/2026/10/09/johor-stays-malaysias-data-centre-powerhouse-as-ai-demand-surges-bmi-says/238358" target="_blank" rel="noopener">Malay Mail (Bernama), 9 Oct 2026</a></li>

<li><a href="https://www.edb.gov.sg/en/news-and-insights/four-data-centre-proposals-selected-as-part-of-pilot-data-centre-call-for-application" target="_blank" rel="noopener">Singapore EDB, 14 Jul 2023</a></li>

<li><a href="https://www.businesstimes.com.sg/international/asean/dayones-johor-data-centre-project-gets-rm15-billion-boost-financing-seven-lenders" target="_blank" rel="noopener">The Business Times, 13 Oct 2026</a></li>

<li><a href="https://www.woodmac.com/press-releases/jb-data-center-expansion/" target="_blank" rel="noopener">Wood Mackenzie, 18 Jun 2026</a></li>

<li><a href="https://www.malaymail.com/news/malaysia/2026/03/10/johor-mb-onn-hafiz-no-approval-for-data-centres-with-high-water-demand-welfare-comes-first/212089" target="_blank" rel="noopener">Malay Mail (Bernama), 10 Mar 2026</a></li>

<li><a href="https://www.thestar.com.my/news/nation/2026/10/14/task-force-approved-27-data-centre-projects-with-estimated-investments-of-rm22597bil" target="_blank" rel="noopener">The Star (Bernama), 14 Oct 2026</a></li>

<li><a href="https://www.edgeprop.my/content/1917841/princeton-digital-seeks-rm49b-loan-johor-data-centre-campus" target="_blank" rel="noopener">EdgeProp.my (citing Bloomberg), 14 Oct 2026</a></li>

</ul>