Jurisdiction - Singapore
Reports and Analysis
Singapore – Property Issues Relating To Data Centres.

31 October, 2013

 

Legal News & Analysis – Asia Pacific – Singapore – TMT

 

Data Centres? 


As data loads for  Singapore  increase,  companies in  Singapore are seeking to relieve the pressure on their IT infrastructure by  outsourcing their IT requirements to  dedicated data centres or colocation  facilities (“DC”). Such DCs need to be  secure and reliable to handle the  nature and complexity of the data,  and also flexible enough to allow for scaling up to meet demand  seamlessly.


A DC usually houses computer  systems and associated components, such as telecommunications and storage systems. It generally includes redundant or backup power supplies, data communications connections, environmental controls (e.g., air conditioning, fire suppression) and security devices. The simplest DC may comprise of just a basic server room for the installation of computer systems. A more complex DC on the other hand, will usually require a lot more physical space and will be designed to host mission critical computer systems, with fully redundant subsystems and compartmentalized security zones controlled by biometric access controls methods.

 

The property issues in relation to DC usually arise in relation to 2 kinds of business models: Retail Colocation and Wholesale. Retail colocation providers sell down to the individual racks or cages, with cages ranging anywhere from 500 to 5,000 square feet for SMEs. Wholesale providers on the other hand build larger facilities ranging from 10,000 to 20,000 square feet. They provide the power and cooling shell of the DC for purchase or lease, typically by a single user or small number of users and service larger enterprises under longer-term contracts. By our reckoning, there are currently around 20 well established DCs in Singapore1. Only recently, IO, a globalleader in software-defined DCs, launched its Asia Pacific operations with Singapore as regional headquarters in September 2013.


Zoning? 


The most important consideration for siting a DC in land-scarce Singapore is zoning as the use of all land in Singapore is regulated via development controls. In general, DCs may only be developed in Business 1 (B1) land use zones. B1 includes uses for clean industry, light industry and full warehouse.


A DC is allowed as an e-business activity within B1 developments subject to clearances from the relevant authorities. Permitted uses included a data farm (data network and data storage) which consists of activities related to database storage, updating and access, including data entry services, data processing, assembly and formatting.2


Power And Cooling? 


A steady flow of high-quality power is a pre-requisite for a DC, as an outage of just a few seconds can spell catastrophe in a DC. To ensure constant server uptime, all DCs should be equipped with full scale preparations for power outage.


Given the aversion to risk of DC operators, a stable and reliable power supply is one of the most critical factors in determining the location and size of the DC facilities. What is attractive about developing a DC in Singapore is that Singapore’s electricity supply is amongst the most reliable in the world save for very rare occasions of voltage dips (a momentary reduction in electricity supply voltage and not a power failure). The energy regulator mandates the proper maintenance of high voltage equipment and imposes stiff penalties to keep the frequency of voltage dips in the electricity system to a minimum.


In general, a purpose-built and dedicated on-site power plant is the most preferred model to meet the high power requirements of nextgeneration DCs and to ensure reliable power supply with minimal transmission losses. In any event, all DCs should be fully equipped with backup power supplies, such as dual electrical power supply or Uninterruptible Power Supply (UPS) system. These must always be coupled with a robust disaster recovery program to safeguard data should any unexpected emergencies occur.


Cooling is also crucial to the operations of DCs. DC operators may wish to consider whether an on-site chilled water plant is a feasible option to increase the overall energy efficiency of the DC. Such a plant can provide the primary source of chilled water for the DC or can be integrated with an on-site power plant. DC operators should also consider leveraging on the economies of scale of shared chilled water facilities for better efficiency and lower energy costs.


Environmental Impact?


DC operators in Singapore may reference published standards which help them to implement the necessary policies, systems and processes to improve their energy efficiency and minimise environmental impact.


Developed by the IT Standards Committee (ITSC) together with Infocomm Development Authority of Singapore (IDA) and SPRING Singapore, the Singapore Standard for Green DCs – Energy and Environmental Management Systems (SS 564:2010) is a certifiable management system that provides DCs with a framework and methodology to achieve energy efficiency. This is modelled after established international management system standards, and is based on the Plan-Do-Check-Act (PDCA) continual improvement framework.


The Singapore Standard also includes recommended metrics for DCs to measure and track their performance in energy efficiency, and identify the potential areas for improvement. With the Standard, DCs can adopt best practices to help manage their mechanical and electrical systems, IT equipment and DC design. Certified DCs not only benefit from reduced costs and higher efficiency, they can also gain recognition from their clients and industry partners for good energy and environment management practices.


As with other management system standards such as ISO 9000 and ISO 14000, SS564:2010 is a certifiable  standard that will help DC operators/owners to improve their overall energy and environmental performance and increase their competitive edge. 

 

To complement the Singapore Standard, IDA and the Building and Construction Authority (BCA) has also been working on a new building rating scheme to benchmark the performance and rate the greenness of DCs. While the Singapore Standard addresses the issue of “How to go green”, the BCA-IDA scheme addresses the question of “How green.”


The BCA-IDA Green Mark scheme comprises of a dedicated green building rating system for DCs that is designed to encourage the adoption of energy efficient design, operation and management of DCs. The performance based green building rating system allows the DC operator to score the impact of green policies, systems and processes that are implemented in the DC. Based on the total score of the DC a final rating (Platinum, GoldPLUS or Gold) is granted that is valid for a period of 3 years. The rating has to be renewed thereafter.


The rating system covers performance efficiencies in areas such as energy, water and environment, with a significantly higher emphasis placed on energy performance of the DC. The scheme covers both existing DCs and new DCs and applies to DCs that are housed in purpose built buildings as well as those that occupy just part of a larger building.3 

The assessment criterion for new DCs is slated to be launched in sometime in 2013.


This new Green Mark for DCs offers a common acceptable yardstick, which will enable DCs to benchmark their degree of greenness with respect to their peers. Rating a DC in categories such as “Platinum”, “Gold”, and “Silver” provides impetus for DCs to better their energy efficiency performance and also improve their branding.


Lease Covenants? 


Apart from the building aspects, the  lease terms to be negotiated by a DC  operator with its landlord should also be robust enough to accommodate the following specific concerns of DCs:

 

Security issues – it is important to specify the level of building security in a lease such that all access controls for thepremises are vested in the DC operator, and entry rights of the landlord or third parties to the premises are strictly monitored or curtailed. The DC operator should also try to negotiate for the right to approve any co-tenants or to exclude competitors in the same building.


Electricity supply – if the landlord is bulk purchasing electricity for all the tenants in the building, the DC operator should have a say in ensuring that a reliable electricity retailer is chosen for the electricity supply or have the right to purchase its own electricity. The DC operator should also verify that the building can be fully equipped with backup power supplies or accommodate an Uninterruptible Power Supply (UPS) system.


Flexibility to grow or shrink – although these are difficult to secure, a DC operator should always try to negotiate for a right of first refusal to take up additional space or a right to surrender excess space as the business model for the DC may change with technological advances or customer needs. For instance, DCs may move to cloud computing, therefore reducing the need for large DC facilities. Conversely, expansion in business plans may also drive a DC customer previously using shared hosting (where multiple customers share a single server) to seek wholesale service solutions which require more physical space.


Liability of landlord for its defaults – In local leases, it is common for the landlord to exclude all liability to the tenant, even for damage or claims triggered by the landlord’s defaults or negligence such as failure to repair or maintain the landlord’s installations, leakage of the piping wiring and sprinkler system in the building, or defects in the building structure. It is advisable to seek to qualify or exclude such exclusions so that the DC operator has recourse against the landlord if the landlord’s defaults or negligence results in damage or losses to the DC or to third party claims against the DC operator.


As it is relatively uncommon for a landlord to accommodate amendments to the lease documents in Singapore, care should be taken to ensure that if the landlord refuses to budge on reasonable qualifications or amendments that the DC operator is fully cognisant of the risks, and takes steps to mitigate such risks such as by qualifying its downstream obligations to its customers or by purchasing adequate insurance coverage.

 

Endnotes:

 

1 Some examples include: 1-Net Singapore Pte Ltd, Ascenix Pte Ltd, Digital Realty, Singapore Data Center, Equinix Singapore Pte Ltd, Fujitsu Singapore, Data Centre Services, Global Switch, Data Centre Singapore, Indosat Singapore Data Center, Internap Singapore Data Center, KDDI Singapore, Data Center, Global Network, ICT Solution, M1, Data Centre Services, NTT Singapore, Data Center Services, Pacnet, Data Center Services, Savvis Inc, Singapore Data Center, SingTel, Managed Hosting, Softlayer, Singapore Data Center, Tata Communications, TCX Data Center Singapore, Telekomunikasi Indonesia International, Singapore Data Centre, Webvisions, Asia-Pacific Hosting & Managed Services.

 

2 More information is available at http://www.ura.gov.sg/circulars/text/dcdnrhb_d0e6928.htm#d0e9698.

 

3 The details of assessment criterion and process that is applicable to existing DCs is available on BCA website at www.bca.gov.sg/GreenMark/green_mark_criteria.html.

 

ATMD Bird & Bird

 

 

For further information, please contact:

 

Sandra Seah, Partner, Bird & Bird
sandra.seah@twobirds.com

 

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