Rising Demand for Data Centers in the Philippines

The Philippines is emerging as one of Southeast Asia’s fastest-growing digital infrastructure markets, driven by surging demand for cloud-based storage and processing capabilities. With internet usage rising, enterprise digitalization accelerating, and strategic infrastructure investments underway, the country is increasingly viewed as a competitive location for data center development, especially for firms seeking regional alternatives to Singapore.

Market outlook: A digital infrastructure boom

The Philippine data center market was valued at approximately US$633 million in 2024 and is projected to reach US$1.97 billion by 2030, according to Research & Markets. This reflects a compound annual growth rate (CAGR) of 20.9 percent. Mordor Intelligence estimates capacity will increase from 560 megawatts in 2025 to 1.3 gigawatts by 2030, while colocation revenue is projected to grow from US$392 million to US$1.16 billion over the same period.

These figures reflect the country’s accelerating digital transformation. Enterprises and government agencies are adopting cloud-based platforms, and Filipino consumers are generating high volumes of digital traffic.

Together, these trends are fueling demand for secure, local, and scalable data infrastructure.

Drivers accelerating the Philippine market

Surging internet and mobile usage

As of early 2024, the Philippines had 86.98 million internet users, accounting for 73.6 percent of the total population. There were 117.4 million mobile connections, equivalent to 99.3 percent mobile penetration. Filipinos are among the world’s most active internet users, with consistently high daily usage of social media, video streaming, and gaming platforms — placing significant pressure on digital infrastructure and increasing the demand for low-latency content delivery.

Enterprise cloud adoption

Cloud adoption in the Philippines is growing rapidly across sectors. According to 451 Research, the cloud services market is expanding at a CAGR of 15.4 percent from 2021 to 2026. An Alibaba Cloud–commissioned study revealed that 85 percent of Philippine businesses expect to be fully cloud-enabled by 2025. The trend is particularly strong in fintech, e-commerce, healthcare, and logistics, where the demand for flexible and compliant data storage is accelerating the need for localized data center solutions.

Government policy and digital infrastructure expansion

The government’s Digital Cities 2025 program, led by the Department of Information and Communications Technology (DICT), has identified over 25 priority cities — including Batangas, Naga, Cabanatuan, and Iligan — for targeted digital infrastructure investment. Complemented by the National Broadband Plan, these initiatives are expanding connectivity in underserved areas and laying the groundwork for regional data center ecosystems.

Emergence of tier-2 and tier-3 cities

Cities such as Cebu, Davao, Iloilo, Clark, and Naga are emerging as new data center hubs, offering lower land acquisition costs, improved energy access, and access to skilled regional labor. Naga City, for example, has been designated a regional IT-BPM center under the Digital Cities program. These locations are increasingly attractive to investors seeking to establish edge computing facilities or backup hosting services outside Metro Manila.

Strategic location in ASEAN’s digital ecosystem

The Philippines occupies a vital geographic position for regional connectivity. It is part of major submarine cable routes like APRICOT, SEA-H2X, and Bifrost, making it a logical node for cross-border cloud hosting and regional data traffic. The country also sits along the government’s Cyber Corridor, a digital backbone linking key cities from Metro Pampanga to Davao. As digital traffic increases across ASEAN, the Philippines’ ability to support redundancy, edge deployments, and regional failover systems is becoming more valuable.

Major industry players

A combination of local and foreign investors is fueling the Philippines’ data center expansion. PLDT, through its subsidiary VITRO Inc., operates the largest data center network in the country and is expanding facilities in Sta. Rosa, Makati, and Cebu. Global operators such as ST Telemedia Global Data Centres, SpaceDC, and YCO Cloud Centers are investing in hyperscale and colocation facilities across Luzon and the Visayas to serve both domestic and regional clients.

Infrastructure-focused firms such as Macquarie Capital and Ayala Corporation are developing vertically integrated platforms that include data centers, fiber optic networks, and tower assets, laying the foundation for a more interconnected and efficient digital ecosystem.

Strategic investment locations

Secondary cities such as Cavite, Laguna, Batangas, and Iloilo are gaining traction due to more favorable land prices, improved connectivity, and regional government support. These areas are increasingly viewed as ideal sites for edge computing hubs, hybrid cloud deployments, and disaster recovery infrastructure.

Further south, Cebu, Davao, and Iloilo, which are part of the government’s Digital Cities program, are being promoted as future-ready digital corridors. Their access to fiber connectivity, emerging IT-BPM talent, and proximity to regional markets make them strong candidates for decentralized data center investments. As infrastructure matures in these locations, they offer compelling alternatives to Metro Manila for investors seeking geographic diversification and operational resilience.

Incentives under the CREATE MORE Act

Under the CREATE MORE Act (RA 12066), data centers registered with investment promotion agencies such as the Board of Investments (BOI) or the Philippine Economic Zone Authority (PEZA) are eligible for a broad package of fiscal and non-fiscal incentives. These include an Income Tax Holiday (ITH) ranging from four to seven years, followed by a choice between a 5 percent Special Corporate Income Tax (SCIT) or the standard 20 percent tax rate with Enhanced Deductions (EDR).

Under the EDR regime, registered businesses may deduct up to 100 percent of expenses related to power, labor, R&D, training, and depreciation. Additional benefits include zero-rated VAT on local purchases, duty-free importation of capital equipment, streamlined customs processing, and visa facilitation for foreign personnel. The law also introduces a local tax mechanism — Registered Business Enterprise Local Tax (RBELT) — capping local levies at 2 percent of gross income in lieu of multiple business taxes.

These incentives are performance-based and must align with the government’s Strategic Investment Priority Plan (SIPP), which includes data centers and digital infrastructure among its qualified sectors. Notably, the CREATE MORE Act improves upon its predecessor by expanding eligibility beyond exporters and allowing incentive periods of up to 27 years, enhancing long-term investment viability.

Operational challenges and infrastructure risks

Despite the strong growth outlook, several constraints remain. Electricity costs in the Philippines are higher than in regional peers like Malaysia or Vietnam, and power supply reliability varies significantly outside of Metro Manila. Data centers require stable grid connections and redundancy, which can increase upfront infrastructure costs in non-core areas.

There is also a shortage of specialized talent, particularly in data center engineering, HVAC system maintenance, and power systems design. While the general IT and BPO workforce is strong, specialized certifications and training remain limited. Public-private upskilling efforts are ongoing, but the talent gap is likely to persist in the short term.

Environmental sustainability is another critical issue. ESG-compliant designs, energy-efficient cooling systems, and integration with renewable energy sources are becoming baseline requirements from international clients and enterprise customers. Developers who fail to meet these expectations may struggle to attract long-term tenants.

Strategic outlook and ASEAN positioning

In the race to develop digital infrastructure across Southeast Asia, the Philippines is carving out a distinctive niche. While it is still an emerging player compared to mature markets like Singapore and rising hubs such as Malaysia and Indonesia, the Philippines offers a compelling set of advantages that foreign investors are beginning to recognize.

Singapore remains the region’s digital core, but its strict moratorium on new hyperscale data centers — driven by energy and land constraints — has led cloud providers and colocation operators to diversify into more scalable alternatives. Malaysia, particularly Johor, is absorbing some of this overflow, but power grid strain and growing competition are intensifying pressure on margins. Vietnam, though attractive, faces persistent issues around energy infrastructure and regulatory opacity.

Against this backdrop, the Philippines stands out for its combination of scalable land availability, relatively low construction costs, and a supportive policy environment that continues to evolve in favor of foreign investment. The archipelagic nature of the country, once viewed as a logistical disadvantage, is now enabling a multi-nodal digital infrastructure model, especially as connectivity improves in key secondary cities.

Additionally, the government’s efforts to align with international standards in data privacy and its push to expand digital infrastructure across the country position it as a strong candidate for regional cloud redundancy, hybrid hosting strategies, and edge deployments.

Over the next five years, the Philippines may not rival Singapore in hyperscale capacity, but it is likely to become a destination for mid-scale, flexible data center deployments, particularly for enterprises and cloud providers seeking geographic diversity, operational resilience, and regional coverage at a lower total cost of ownership.

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