Can Malaysia Build Its Data Centre Future Without Draining Its Resources?

For the construction industry, the boom represents a significant pipeline of projects,  from land development and building construction to electrical infrastructure, cooling systems and specialist engineering.

But behind the impressive investment numbers lies an increasingly important question:

Can Malaysia continue building its digital infrastructure without putting unsustainable pressure on its energy and water resources?

The resource challenge behind the AI boom

Data centres are unlike conventional commercial buildings. They operate around the clock and require substantial amounts of electricity to power servers and computing equipment. At the same time, cooling systems are needed to remove the enormous amount of heat generated by high-performance computing.

As AI workloads become increasingly intensive, these requirements are expected to grow. According to Malaysia's Ministry of Energy Transition and Water Transformation, data centres accounted for approximately 7% of electricity consumption in 2026, equivalent to around 10,544 GWh. By 2035, this share is projected to rise to 31%, or approximately 73,274 GWh. At the same time, peak electricity demand in Peninsular Malaysia is projected to increase from 21.3 GW in 2026 to 33.5 GW by 2035. The numbers demonstrate just how significantly data centres could reshape Malaysia's energy landscape.

And electricity is only half of the equation.

Water is becoming the next big concern.

Cooling is one of the most important functions within a data centre, and traditionally, water has played a significant role in cooling systems. This has become particularly relevant in Johor, where rapid data centre development has raised concerns about pressure on local water resources. Recent reporting has highlighted growing public concern around water consumption, while the government has been strengthening Johor's water infrastructure in response to rising demand from industrial development and data centres. The issue is significant because data centre demand is arriving alongside the water needs of existing communities and other industries.

In July 2026, the Malaysian government stated that new data centre projects would only be approved when sufficient energy and water supply capacity is available, while domestic consumers would remain the priority for water supply.

This signals a shift in the conversation. The question is no longer simply how quickly Malaysia can build data centres, but how sustainably it can build them.

Malaysia's Guideline for Sustainable Development of Data Centre, developed under the Digital Ecosystem Acceleration Scheme (DESAC), places specific emphasis on energy and water efficiency. The guideline introduces Power Usage Effectiveness (PUE) and Water Usage Effectiveness (WUE) as key performance measures. For water, the guideline recommends a design WUE of 2.2 m³/MWh or lower, with operators expected to continuously monitor their actual performance and work towards improving WUE over time. It also encourages the use of reclaimed or reused water.

This is already translating into real-world projects. In Johor, some data centre operators are investing in their own water treatment infrastructure and using reclaimed wastewater rather than relying entirely on potable water. Bridge Data Centres and ZData/Computility Technology, for example, have developed water treatment facilities using wastewater from Indah Water Konsortium. Meanwhile, ZDATA's Johor development has achieved GreenRE Platinum certification, the highest rating under the GreenRE scheme, and received Malaysia's Green Data Centre Recycled Water Certification.

These developments suggest that sustainability is increasingly becoming part of the infrastructure itself, not simply an additional feature added after construction.

What does this mean for construction?

The resource challenge could fundamentally change how data centres are designed and built. For architects, engineers, contractors and developers, sustainability considerations are increasingly becoming part of the earliest stages of project planning.

This could mean greater demand for:

1. Water-efficient cooling systems

2. Reclaimed and recycled water infrastructure

3. Air-cooled and closed-loop cooling technologies

4. Renewable energy integration

5. Energy-efficient building systems

6. Smart monitoring and energy management

7. Low-carbon construction materials

8. More efficient electrical infrastructure

The location of a data centre may also increasingly depend not only on land availability and connectivity, but on whether the surrounding infrastructure can support its long-term energy and water requirements. In other words, infrastructure capacity could become just as important as real estate availability.

Could sustainability become a competitive advantage?

For Malaysia, the challenge presents an opportunity.

The country does not necessarily need to choose between becoming a major digital infrastructure hub and pursuing sustainability. Instead, the two ambitions could potentially reinforce one another.

Developing more efficient data centres could create demand for new technologies, engineering expertise and construction solutions. It could also encourage innovation in areas such as renewable energy, water recycling, advanced cooling and smart building systems.

For the construction ndustry, this creates a new market for companies that can deliver high-performance infrastructure with lower resource consumption. The next generation of data centres may therefore be judged not only by how much computing power they can accommodate, but also by how efficiently they use the resources required to operate them.

Building the digital infrastructure of tomorrow

Malaysia's data centre boom is unlikely to disappear anytime soon. The country's position within Southeast Asia, combined with growing AI and cloud demand, continues to attract major investments. But growth brings responsibility. As more facilities are planned and construction accelerates, the industry will need to look beyond the physical building itself and consider the wider infrastructure ecosystem supporting it.

How much electricity will it require? Where will the water come from? How efficiently can it be cooled? Can reclaimed water replace potable water?

And perhaps most importantly:

Can Malaysia become a leading digital infrastructure hub without compromising the resources that its communities and industries depend on? 

The answer may ultimately depend on how the industry builds today.

References

Ministry of Investment, Trade and Industry (MIDA), Malaysia — Sustainable Infrastructure, Local Impact: The Rise of Data Centres in Malaysia.

MIDA: Guideline for Sustainable Development of Data Centre.

Ministry of Energy Transition and Water Transformation / Bernama : Electricity Consumption of Data Centres Expected to Surge to 31% by 2035.

Bernama: Government to Approve Data Centre Projects Only If Energy, Water Supply Are Sufficient.

Reuters : Malaysia's Resource Anxiety Tests Asia's Fastest Data Centre Build-Out.

The Star / Bernama: Johor Data Centres Turn to Recycled Water.

MIDA: Powering Up: Navigating the Energy Crossroads of Malaysia's Data Centre Boom.