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According to Jabez Tan, head of research at Structure Research, a combination of demand growth, favorable economics, and government support is driving investment around key cities in Malaysia
In sum – what to know:
Regional advantage – Malaysia is attracting hyperscale and AI infrastructure investment through its location, connectivity, and lower development costs than some neighboring markets.
Policy support – Tax incentives, renewable energy programs, and streamlined approvals are helping drive data center development.
Growth constraints – Power availability, grid capacity, and land access are becoming critical factors that will influence where future projects are built.
Malaysia is strengthening its position as one of Southeast Asia’s fastest-growing markets for data centers and AI infrastructure, attracting investment from hyperscale cloud providers and digital infrastructure developers seeking capacity beyond more constrained regional hubs.
According to Jabez Tan, head of research at Structure Research, a combination of demand growth, favorable economics, and government support is driving investment around Kuala Lumpur, Cyberjaya and Johor.
“Malaysia’s recent boom in data centre and AI infrastructure investment around Kuala Lumpur (notably Cyberjaya) and Johor is being driven by a mix of demand-side growth, strategic location advantages, supportive public policy, and competitive economics — making the country an attractive hub for hyperscale cloud, AI and digital infrastructure across Southeast Asia,” the analyst told RCRTech.
Tan said the growth is being fueled by increasing adoption of cloud services, AI workloads, and digital applications across the region. Malaysia’s location near Singapore and other ASEAN markets, combined with strong connectivity through submarine cable networks, provides low-latency access for cloud and AI services.
Cost competitiveness is another important factor. “Compared with nearby Singapore, Malaysia generally offers lower land and development costs, competitive construction costs per MW, and ample land for large campus-style builds, which is particularly attractive to hyperscale data centre developers seeking 100 MW+ expansions,” he added.
Government policies have also helped accelerate investment. Through initiatives such as the Digital Ecosystem Acceleration (DESAC) Scheme and Malaysia Digital Status framework, authorities offer tax incentives and support for digital infrastructure projects.
Malaysia is also increasingly linking data center growth to sustainability objectives. The government has introduced energy-efficiency guidelines for data centers, while programs such as the Corporate Renewable Energy Supply Scheme (CRESS) allow operators to procure renewable energy from third-party suppliers.
At the same time, the Malaysia Investment Development Authority (MIDA) has streamlined investment approvals, while national utility Tenaga Nasional is upgrading the power grid to support rising demand from digital infrastructure projects.
Despite the strong momentum, challenges are beginning to emerge as developers compete for power and suitable sites. “The biggest constraints are power availability and grid capacity, land and resource requirements, as well as the evolving permitting and regulatory landscape for data center projects,” Tan said.
Those constraints are expected to influence how and where future capacity is deployed. “Investors will prioritize sites with firm power agreements, early utility engagement, and diversified energy sourcing (renewables/PPAs/back-up generation) over speculative pipelines,” he added.
Tan also expects sustainability requirements to become increasingly important as operators seek access to renewable energy and work to improve facility efficiency.
Meanwhile, established hubs such as Cyberjaya and Kuala Lumpur may face growing limitations. “High-density zones like Cyberjaya/Kuala Lumpur may see slower greenfield growth due to land and grid constraints, shifting some development to emerging hubs like Johor, Penang, and secondary cities where space and grid capacity are easier to secure,” he said.
AirTrunk recently announced an expansion in Malaysia with plans to invest $3 billion in two new data center campuses in Johor, further scaling its regional capacity to support growing demand for cloud and AI infrastructure.
The new facilities, JHB3 and JHB4, will be located in Iskandar Puteri, close to the company’s existing JHB1 and JHB2 sites. Together, they are expected to deliver more than 280MW of IT capacity and will use recycled water for cooling.
The expansion builds on AirTrunk’s earlier developments in Johor. The JHB1 campus, launched in 2024, currently provides more than 50MW in its initial phase, with over 150MW planned at full build-out. The company also announced the 270MW JHB2 facility in early 2025.
Once completed, AirTrunk’s total portfolio in Malaysia is expected to exceed 700MW of IT capacity, supported by total investment of approximately $6.8 billion.
