Johor’s rapid emergence as one of Southeast Asia’s most active data centre hubs is now encountering a critical sustainability checkpoint: water security. As more large-scale, water-intensive facilities cluster across the state, experts are warning that continued reliance on public water infrastructure could create long-term risks for households, industries and the broader economy.
The concern is not about whether Johor should attract data centres, but about how this growth is managed. With dozens of projects approved and many more in the pipeline, the cumulative impact on utilities—particularly water and electricity—is becoming impossible to ignore.
Why Water Is Becoming the New Constraint
Data centres are among the most capital-intensive real estate assets in the modern economy. While they require relatively little labour, they depend heavily on uninterrupted access to utilities. Cooling systems, in particular, consume large volumes of water to keep servers operating at optimal temperatures around the clock.
When these facilities are developed in isolation, the impact on public utilities can appear manageable. However, when multiple data centres are built within the same region, their combined demand can quickly place strain on existing supply systems.
In Johor’s case, this risk is amplified by the pace of approvals. The state is projected to host dozens of fully operational data centres by the end of the decade, many of them concentrated in specific industrial zones. Without coordinated planning, what appears sufficient today may become a bottleneck tomorrow.
The Case for Self-Sufficient Water Infrastructure
Experts argue that data centre operators are well-positioned to shoulder the responsibility of securing their own water sources. Unlike labour-intensive industries that rely heavily on public services, data centres operate with small workforces and high capital budgets.
From an economic perspective, this gives operators the capacity to invest in dedicated utility solutions without undermining project viability. Such investments may include on-site water storage, alternative supply arrangements, or the exploration of groundwater resources—provided these are pursued responsibly.
The principle underpinning this approach is straightforward: developments that generate significant economic returns should internalise the costs of their environmental and infrastructure impact, rather than transferring those costs to the public sector.
Groundwater and Reclaimed Water: Options with Conditions
Among the alternatives being discussed is the controlled use of groundwater. While this offers a potential supplementary source, it is not without risks. Over-extraction or poorly monitored usage could disrupt aquifers, affect surrounding communities and compromise long-term water security.
Any exploration of groundwater must therefore be grounded in rigorous hydrogeological studies, continuous monitoring and clear regulatory oversight. This is not a shortcut solution, but one that requires scientific discipline and long-term stewardship.
Another increasingly viable option is the use of reclaimed water. Treated wastewater, processed through reclaimed water treatment facilities, can be suitable for cooling systems and other non-potable uses. This approach reduces pressure on treated water supplies reserved for domestic consumption and aligns with circular economy principles.
Some operators are already being encouraged to integrate reclaimed water into their designs, either independently or in collaboration with state water agencies.
Protecting Public Supply and System Resilience
The broader objective of encouraging alternative water sourcing is not to deter investment, but to protect systemic resilience. Public water systems are designed primarily to serve households, essential services and a broad base of industries. When high-demand users draw heavily from these systems, the margin for error shrinks.
This becomes particularly critical during periods of stress, such as prolonged droughts, extreme weather events or disruptions at treatment plants. In such scenarios, competition for water intensifies, and the consequences of inadequate planning become more severe.
By reducing dependence on public supply, data centre operators not only safeguard their own operations but also contribute to the resilience of the wider system. This approach ensures that growth in one sector does not inadvertently undermine stability elsewhere.
Cluster-Based Planning Over Project-by-Project Approvals
A recurring concern among sustainability experts is that data centre approvals are often assessed on a project-by-project basis, rather than through a holistic, cluster-based lens. While individual projects may meet technical requirements, their collective impact can exceed the capacity of local infrastructure.
Water supply, treatment capacity, electricity grids and land-use constraints do not operate in silos. They interact over time, and their limits are shaped by cumulative demand rather than isolated consumption.
To address this, calls are growing for state authorities to define clear development capacity thresholds for data centre clusters. These thresholds should be informed by long-term projections spanning 10 to 20 years, accounting for population growth, climate variability, non-revenue water rates and the needs of other economic sectors.
Such an approach does not restrict development arbitrarily. Instead, it provides clarity to investors, ensuring that approvals are granted within a framework that can be sustained over decades.
Energy Demand Adds Another Layer of Complexity
Water is only one side of the equation. Data centres also place continuous, high-load demands on electricity supply. As Malaysia’s digital economy expands, energy consumption from data centres is expected to rise sharply, particularly in Johor and the Klang Valley.
This creates a dual challenge: ensuring that power generation and grid infrastructure keep pace with approvals, while also managing environmental impacts. Without careful coordination, the risk of supply constraints increases, potentially affecting other industries and residential users.
Integrated planning that considers both water and energy is therefore essential. Sustainable data centre development cannot be achieved by addressing one utility in isolation.
Implications for Investors and the Property Market
For investors, these sustainability considerations are becoming increasingly material. Data centres are no longer evaluated solely on yield potential or tenant demand. Environmental readiness, infrastructure resilience and regulatory alignment are now central to project viability and long-term value.
Assets that incorporate self-sufficient utility solutions are likely to be viewed more favourably by institutional capital, particularly as environmental, social and governance expectations continue to tighten. Conversely, projects that rely heavily on public infrastructure without mitigation strategies may face higher regulatory risk and potential operational constraints.
From a property market perspective, Johor’s position as a data centre hotspot remains intact. However, the next phase of growth will be defined by quality of planning rather than quantity of approvals.
A Sustainable Path Forward
Johor still has room to grow as a digital infrastructure hub, but that growth comes with conditions. Water and energy resources that appear adequate today can quickly become constrained if development accelerates without coordination.
The real risk lies not in any single data centre, but in the cumulative impact of dozens operating simultaneously. Addressing this risk early—through independent water sourcing, reclaimed water use, cluster-based planning and long-term capacity assessments—will determine whether Johor’s data centre boom becomes a sustainable success or a cautionary tale.
As Malaysia moves toward 2026 and beyond, the message is clear: attracting investment is no longer enough. How that investment integrates with environmental limits and public infrastructure will define its true economic value.
