With tech giants investing billions, Johor is emerging as a data center hub—but resource challenges could threaten its transformation.

Johor, often referred to as Malaysia’s southern gateway, is separated from Singapore by just one causeway, making it one of the world’s busiest border crossings. Due to significant economic and currency disparities, workers with similar qualifications can earn up to three times more in Singapore than in Malaysia. Over the past three decades, nearly 150,000 Malaysians have commuted daily between Johor and Singapore.

This lifestyle mirrors those who make similar cross-border journeys between Shenzhen and Hong Kong, and the Johor-Singapore relationship bears similarities to that of Shenzhen and Hong Kong in the past. Malaysian officials have acknowledged this resemblance, with Johor’s chief minister publicly setting a goal for the Johor-Singapore Special Economic Zone to become the “Shenzhen of Southeast Asia.”

Giselle Chan is one of the many commuters traveling daily between Malaysia and Singapore. Working at a data center for a telecommunications company in Singapore, she starts her day at 5 a.m, navigating through a border crossing teeming with vehicles lining up at the Johor-Singapore Causeway. Chan told 36Kr that she must board the checkpoint shuttle bus over two hours in advance to reach her workplace on time.

This grueling routine could ease in the future as Johor undergoes rapid transformation.

Palm oil plantations and rubber estates are among the most common sights in Johor. However, in recent years, large tracts of palm trees have been cleared to make way for modern tech parks. Multinational giants like Google, Microsoft, Amazon, and Nvidia have all announced plans to establish operations in Malaysia.

Malaysia’s data center market is expanding rapidly. A report by Research and Markets projects the Malaysian data center market to grow by 72% from 2022 and reach USD 2.25 billion by 2028, with a compound annual growth rate (CAGR) of approximately 9.4%, outpacing Southeast Asia’s overall CAGR of approximately 6.6%.

Johor Bahru, in particular, is emerging as a hotspot for data center construction. A mid-2023 report by Malaysian real estate agency Zerin Properties estimated that Johor would attract MYR 17 billion (USD 3.8 billion) in data center investments by 2024.

Tech giants bet on the data center boom

Since 2023, Malaysians have observed a growing association between their country and major tech giants. One Malaysian interviewed by 36Kr optimistically referred to 2023 as the “year of Malaysia’s tech rise.”

In March 2023, Amazon announced plans to invest USD 6 billion in Malaysia by 2037 to bolster its cloud infrastructure. Later that year, in December, Nvidia revealed its intention to build a USD 4.3 billion artificial intelligence data center in the country.

This year has seen an intensified presence of multinational tech companies in Malaysia. In May, Google committed to a USD 2 billion investment to develop data centers and establish a new Google Cloud region. At the same time, Microsoft announced a USD 2.2 billion investment over the next four years, focusing on cloud computing and AI services.

In June, Microsoft purchased land in Johor for approximately USD 85.5 million to construct a data center. ByteDance is reportedly planning to invest USD 2.13 billion in a local AI center, while Oracle recently unveiled plans to allocate USD 6.5 billion toward cloud service data centers in Malaysia.

According to publicly available data compiled by 36Kr, Malaysia has secured more than USD 25 billion in investments for data center projects over the past two years. Additionally, a report by IQI highlights that Malaysia already hosts over 30 data centers, with more than ten others under development.

Tan Qingyun, a resident of Kulai, Johor—a small county along the federal highway connecting Kuala Lumpur and Johor Bahru—recalled that her community experienced a construction boom beginning in 2023.

One major development in the area is homegrown giant YTL Corporation’s solar-powered data center campus, a massive project spanning 664 hectares. Public records indicate that this facility will be Malaysia’s first solar-powered data center and the largest of its kind in Southeast Asia. Notably, YTL is partnering with Nvidia for its planned AI data center in Malaysia.

Johor’s real estate market has also seen a surge in activity. Several local residents confirmed to 36Kr that, since 2022, the property market has been thriving, with ready-built homes in high demand and presale units selling rapidly. Concurrently, housing rents in Johor have risen significantly, doubling over the past two years.

Building a new Northern Virginia

Currently, Northern Virginia, US, is the world’s largest data center market. Approximately 70% of the world’s internet traffic flows through this region daily. Ashburn, a city within Northern Virginia, was the first in the world to surpass 1 gigawatt of data center capacity. Since the 1990s, tech giants such as Google, Amazon, and Microsoft have established massive data centers there, drawn by the area’s abundant electricity, water, and land resources.

Johor’s potential to become the next Northern Virginia is not far-fetched.

Initially, multinational tech companies targeted Singapore for data center construction in Southeast Asia. Google, for example, built its first Southeast Asian data center in Singapore’s Jurong West in 2011 and operated three facilities in the city-state by 2022. However, Singapore’s limited energy resources have posed significant challenges. To address land constraints, Google adopted a vertical construction model for its Singapore data centers, building multistory urban facilities on plots as small as 2.45 hectares.

Johor’s opportunity emerged in May 2019, when Singapore’s Ministry of Trade and Industry temporarily suspended state land sales for data centers and halted permits for new developments to curb growth. At the time, Johor still had vast expanses of oil palm and rubber plantations awaiting development. Public data suggests land costs in Johor are just one-fourth those of Northern Virginia. Additionally, Malaysia offers relatively stable and affordable electricity supplies, making Johor an attractive alternative for tech companies. Its close proximity to Singapore further enhances its appeal.

However, the rapid expansion of data centers comes with substantial resource demands, particularly for electricity and water. Cooling systems for these facilities require enormous amounts of water. For instance, Google’s data centers consume an average of 1.7 million liters daily.

A report by RHB Research highlights a looming issue: Johor’s sole water supplier, Ranhill SAJ, has received requests for 439.67 million liters of daily water supply for data centers through 2035. Yet, the supplier can only accommodate 316.38 million liters per day, leaving a significant 28% shortfall.

While Johor’s transformation into a data center hub could boost wages and create job opportunities for Malaysians, it also raises serious concerns about resource overuse and environmental sustainability. Water shortages, in particular, symbolize the challenges tied to the industry’s growth. For Malaysia, the vision of becoming a data center capital brings the promise of prosperity but also the risk of exhausting resources before achieving sustainable wealth.

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