Hong Kong , long known as the gateway to China, is seeing competition heat up with Singapore in efforts to attract more mainland companies that invest in data centre services for

their international expansion.

Land-strapped Hong Kong has only three new data centres expected to go online over the next three years to support growing co-location activity, compared with seven new facilities planned in Singapore over the same period, according to Canadian research and consulting firm Structure Research.

“Singapore is increasingly being chosen as the preferred location over Hong Kong by major information-technology services, infrastructure and outsourcing providers,” Structure Research senior analyst Jabez Tan said.

He pointed out that advances in networking technology have enabled those providers, including the likes of Amazon Web Services and Microsoft’s Azure business, “to achieve consistent performance serving China and the rest of Asia from primary deployments in Singapore”.

Data centres are secure, temperature-controlled facilities built to house large-capacity servers and data-storage systems, and feature multiple power sources and high-bandwidth internet connections.

Co-location is an outsourced data centre service in which the operator provides the facility, while the customers or tenants supply their own servers and networking equipment.

READ MORE: Singapore ‘mantrapping’ away Hong Kong financial competitiveness

Companies in the internet, digital entertainment, logistics and financial services fields are among the major users of data centres, which host cloud computing operations. Cloud services enable companies to buy, lease, sell or distribute software and other digital resources online, just like electricity from a power grid.

Data from Structure Research showed that Hong Kong’s co-location market is projected to increase 15 per cent to US$709.3 million this year, up from an estimated US$615.9 million last year.

Rival Singapore’s co-location market is nearly double the size of that in Hong Kong, with forecast revenue this year of US$1.27 billion. That is up 16 per cent from last year’s US$1.1 billion revenue.

“Singapore has arguably closed the gap on Hong Kong when it comes to being viewed as a jumping off point for China,” said Tan, noting the greater co-location capacity provided in the city-state.

“But with data centre space utilisation in Hong Kong greater than 50 per cent and power utilisation at less than 50 per cent, we see there is still plenty of runway for the Hong Kong data centre market.”

Nicholas Yang Wei-shung, Hong Kong’s secretary for innovation and technology, said in December that initiatives are being made to provide more options for operators.

“Although land is a scarce resource in Hong Kong, we have made every effort in the past few years to make available suitable land for data centre development, from greenfield sites to conversion of existing industrial buildings,” Yang said.

PCCW Solutions, the information-technology services arm of billionaire Richard Li Tzar-kai’s flagship company, has been promoting the building of vertical data centre infrastructure on converted industrial sites as a quick way to meet rising demand for these facilities in the city.

In 2014, it launched a 16-storey facility converted from an old industrial building in Kwai Chung.

CLP Power has supported the sector by building up electricity infrastructure in major data-centre locations like Tseung Kwan O.