In recent years, Johor has established itself as Southeast Asia’s fastest-growing data center hub. This has brought billions of dollars’ worth of projects into the Malaysian state, reaching $39.08 billion as of the second quarter of 2025 (Reuters) and making data centers one of the country’s most valuable forms of investment.
However, this rapid boom has also put pressure on local resources and sustainability strategies. In turn, Johor has been introducing tightening approval processes for data center projects. But what does this mean for businesses looking to scale their data center operations in the area?
In this article, Evernex will dive into what is driving Johor’s data center boom, how Malaysia is balancing growth with restraint, and key strategies to scale up data center operations without sacrificing sustainability objectives.
Why is Johor emerging as a data center hotspot?
When neighboring Singapore introduced a moratorium on new data center projects in 2019, Johor was quick to absorb the demand. While the ban was lifted in 2022, Malaysia had already established itself as a key location to accommodate overflow from Singapore’s data center market. Key factors driving Johor’s boom include:
Geography
Malaysia is not only geographically close to Singapore, it also has a larger land mass and lower population density. This means it has more physical space available to develop data center constructions.
Johor’s proximity to Singapore also allows the state to benefit from lower-latency connections to other close-by data centers. This offers rapid, smooth network performance.
Economic benefits
As well as low latency and more space to build, Malaysia also offers a cost-effective space to construct and power data centers. White & Case LLP confirm that “construction costs are among the lowest in Southeast Asia, while electricity tariffs average around US$0.10/kWh”. The Malaysian government also offers tax incentives for businesses making local investments, while a “reliable national grid, mature energy infrastructure and growing access to renewable power” all allow businesses to balance resilience with sustainability objectives.
AI demand
The increasing rates of digital transformation, hyperscaler and AI workloads, as well as “thriving e-commerce and [the pursuit of] digital sovereignty” (EdgeConneX), are pushing businesses across the world to build and adapt data center infrastructures able to support evermore intensive, high-density, and evolving compute requirements.
However, this growth is now also being met with a strain on resources and regulatory pressures.
What are the new constraints faced by Johor?
According to Reuters, “power grid capacity and water resource constraints” are two of the primary issues driving Malaysia to slow down its data center development. Data centers require huge amounts of energy to function, as well as water for cooling systems. This is inevitably having an environmental impact as well as a practical one, standing in contrast to Malaysia’s commitment to achieving net zero emissions by 2050.
As well as offering incentives to data centers “based on a given project’s sustainability”, since mid-2024, Johor has also been rejecting a considerable proportion of non-AI data center proposals due to their failure to meet sustainability standards, according the Data Center Dynamics.
It is no secret that AI-centric data centers consume vast amounts of energy and water. However, in line with the increased global focus on AI workloads, the Malaysian government has been prioritizing the development of a smaller number of large, AI-focused data center projects, rather than a larger number of smaller, non-AI data centers.
Clearly, this strategy will have –and is having- a significant impact on the IT strategies of businesses that choose not to shift to AI-heavy data center infrastructures.
What does this mean for existing data centers?
New data center projects are becoming less and less likely to get approval. But what about the non-AI data centers already in Johor, and any plans for their expansion? Let’s find out:
Power availability and sustainability
The Johor State Data Centre Development Planning Guidelines indicate that physical infrastructure, such as servers, networking devices and security elements, is one of a data center’s primary general characteristics. This means hardware is an indispensable, key element of any data center. Unfortunately, it can require considerable energy and water to function and to stay cool.
Power availability is therefore a limiting factor when planning to scale infrastructure, meaning businesses cannot simply keep adding hardware to existing infrastructures to keep up with operations.
Meanwhile, modern data center cooling techniques such as liquid or immersion cooling will be taking center stage, consuming far less energy and water in the long term than traditional air conditioning.
Compliance and approval complications
Older facilities and legacy equipment can risk non-compliance with efficiency, security and sustainability regulations, especially if not adequately supported with maintenance and updates.
Johor’s recent liability to reject building proposals also means that businesses can no longer take for granted that their data center expansion plans are guaranteed to go ahead.
When balancing performance, sustainability and compliance with Johor’s constrained environment, IT leaders’ main challenge is shifting from adding hardware to maximizing the potential of what they already have.
How can IT leaders scale their infrastructures sustainably?
In the face of limited approvals, sustainability objectives and power availability pressures, IT leaders need strategies which can help them reach their ESG targets, stay within the law and control costs, all while maintaining a competitive edge.
Let’s explore how businesses can continue to scale their performance and meet market needs without adding new hardware to their data center infrastructure.
Extend IT lifecycle without compromising performance
Lifecycle extension is a growing trend in business IT across the world, supporting stable data center performance for longer. This allows companies to avoid the costs of frequent hardware refreshes, minimize their production of e-waste and maximize the ROI on their existing hardware.
Businesses can employ a range of techniques to extend the useful lifespan of data center hardware past its manufacturer-established End-of-Life and End-of-Support dates. These include:
- Regular support and upkeep (switching to third-party maintenance when OEM support runs out)
- Leveraging refurbished spare parts to avoid replacing an entire system or asset
- Reassigning legacy assets to lower-priority systems
Hybrid strategies allow businesses to balance sustainability and cost-effectiveness with cutting-edge performance by prioritizing the replacement of critical assets and redeploying older, but still functional, devices to non-critical systems.
In an environment where approval of data center expansion is increasingly limited, but competition is tight, the managed lifecycle optimization of existing assets is key.
Maximize the usage of existing hardware resources
Many data centers are underutilized, capable of taking on far more workload than they currently do. Meanwhile, even idle servers consume energy, presenting an elevated economic and environmental cost relative to their performance.
Rather than adding more assets to improve efficiency and capacity, businesses can achieve the same goals by getting the most out of their existing infrastructure. Unlocking data center hardware’s full potential can look like:
- Virtualization and workload consolidation: This combines multiple workloads onto fewer devices and maximizes the usage of each physical asset.
- Capacity planning: Forecasting demand prevents both overprovisioning and shortages, ensuring each resource is allocated efficiently and utilized to its full potential over time.
- Intelligent workload distribution: Dynamically assigning workloads means no hardware is underused or overburdened, minimizing stranded capacity.
Combined with lifecycle extension, optimized resource usage means data centers can scale up their operations to support demand without necessarily expanding their hardware or physical footprint.
Optimize cooling for high-density workloads
Data centers, particularly servers, produce huge quantities of waste heat. As AI workloads increase, this means thermal output rises in turn. Traditional air conditioning may not be able to scale in line with such increases, risking data center hardware overheating or imposing limits on each asset’s workload.
To allow servers to run at their full capacity without risking the consequences of overheating, which range from downtime to emergency replacements for broken-down hardware, businesses must also optimize their cooling systems.
Effective data center cooling solutions for scaling or high-density workloads can include liquid cooling and hot/cold aisle containment.
Modern cooling is also far more power-effective, and therefore cost-effective in the long-term, an important factor when power and water availability are under rising pressure.
Tactical shift: from expansion to optimization
In the past, scaling up operations meant expanding a business’s physical data center. However, in the face of Johor’s increasingly strict approval processes, focus on sustainability and preference for AI-centric data centers over smaller, more traditional data center projects, the old “build more” model is phasing out.
Taking its place is a new approach to scaling operations: adopting smart optimizations and a circular, sustainable infrastructure. This means leveraging maintenance, legacy equipment redeployment, and refurbished spare part replacements to achieve more with existing hardware and maximize its useful life.
In turn, these strategies help ensure stable long-term business performance without physical expansion, even with increased workloads.
Optimizing hardware lifecycles and extending infrastructure longevity can help enterprise data centers in Johor and across the world scale operations without relying exclusively on frequent hardware refresh cycles.
About the author:
Yashwant Kumar is the Regional Sales Director for Southeast Asia, bringing over 9 years of experience in international business development. Known for his ability to initiate and grow strategic accounts, he supports clients in achieving their goals while promoting sustainable IT practices.
