Data centers drive 80% of Indonesia's industrial land demand amid AI boom

Data centers are now the dominant force in Indonesia's industrial land market, accounting for a staggering 80% of demand over the past year. This surge is directly linked to the explosive growth of artificial intelligence (AI) and the increasing need for digital infrastructure.

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Data center demand has increased over the past year due to the growth of AI.

Property consultancy Jones Lang LaSalle (JLL) Indonesia reports a dramatic increase in the physical footprint of these facilities. Land requirements for a single data center have ballooned from approximately five hectares two to three years ago to between 10 and 30 hectares today. This expansion is transforming the industrial landscape across the archipelago.

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The amount of land needed had increased from around five hectares two to three years ago to between 10 and 30 hectares per data center today.

While the overall electricity supply from state utility PT PLN (Persero) is considered adequate, the process of meeting the substantial energy needs of data centers, often requiring 100 to 200 MW per project, is a significant hurdle. PLN requires a lead time of around two years to provide the necessary power, and the primary challenge lies in procuring and installing essential supporting infrastructure, such as transformers for substations.

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State electricity company PT PLN (Persero) requires a lead time of around two years to meet the electricity needs of a data center.

Despite these infrastructure challenges, the demand for industrial and logistics space remains robust. JLL noted continued positive demand, with occupancy rates reaching 95%. Foreign direct investment plays a crucial role, contributing 50% to investment in the manufacturing sector, which, alongside data centers, is a key driver of industrial land absorption.

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The main challenge, she said, was the procurement process required to prepare supporting infrastructure, including transformers for substations.