The cool alternative to air conditioning
PATRIZIA Operating Partner - Infrastructure Patrick Lee and PATRIZIA Associate Director - Sustainability Infrastructure Jane Baseby explain the growth in use of cooling-as-a-service (CaaS) infrastructure, its popularity in Asia-Pacific and PATRIZIA's first investment into a pioneering CaaS business in the region.
Patrick Lee,
Operating Partner Infrastructure
Jane Baseby,
Associate Director - Sustainability Infrastructure
In our homes and in our workplaces over the summer months, we face a battle: to stay cool. In hotter regions of the world, this problem is exacerbated. We turn to our traditional air conditioning systems and portable devices, such as fans, to find relief from the heat. And business owners examine the most cost-effective ways to stop their employees melting in their buildings.
The CaaS solution
So, what if you were told that there was a business model innovation which could deliver better conditions to your occupants, bring your costs down and reduce your carbon emissions?
This is the premise of cooling as a service (CaaS), which allows building owners and managers access to cooling in coordination with the consumption habits of occupiers.
CaaS relies on data to optimise the supply of cooling, using historic patterns and predicative power to minimise energy waste and carbon intensity in commercial and industrial real estate.
CaaS promises its customers optimal temperatures for a lower cost and carbon footprint and without an upfront capital cost. In return, the CaaS provider who owns the cooling infrastructure is compensated with a long-term inflation linked revenue stream that comes with a built-in incentive to increase returns by delivering the service efficiently.
The business model
The business model sees the owner of cooling infrastructure sell the cool air generated by industrial scale chillers and air handlers to an end customer, who works in or operates within the same building.
The cooling infrastructure tends to be onsite to where it supplies, differentiating it from a district cooling network that owns a distribution network spanning a larger geographical area.
The equipment itself resembles traditional infrastructure, complete with compressors, valves, pipes, pumps and gauges, helping it to slot in neatly to the basements of our built environment, explicitly demonstrating the combination of real estate and infrastructure – known by PATRIZIA as RE-Infra.
CaaS’s critical selling point is that it helps customers decarbonise their operations by outsourcing the complexity of low-carbon cooling to experts. It leverages energy-efficient technology to reduce emissions and lower costs - without customers needing to invest, manage, or maintain a cooling system. It also has the extra benefit of using data from across the portfolio to train AI algorithms, which operate each system more intelligently and efficiently..
In addition, regular maintenance and upgrades mean CaaS cooling systems avoid the energy waste of a poorly maintained system, and operators tend to use environmentally friendly refrigerants that reduce greenhouse gas emissions and improve overall energy efficiency.
All in all, CaaS provides the same cooling needed with a lower energy consumption, making it cheaper for customers.
A growing market
To establish where CaaS sits as a market, it has to be taken into account with heating as a service (HaaS) as data refers to the two holistically. CaaS represents over half of the figures supplied whereby the cooling and heating as a service market has an estimated value of USD 85.1 billion in 2025, with projections to reach USD 176.5 billion by 2032
Source: Kaer Pte. Limited, Singapore based CaaS provider
Asia-Pacific leads the way
Perhaps unsurprisingly, given the climate in the region, Asia-Pacific (APAC) leads the way with an estimated share of 34.5% of the USD 85.1 billion global cooling and heating as a service market. North America comes next on 21.5%.
At an individual country level, growth prospects are strong in the US, Germany, China, India and Brazil.
APAC’s dominance is even less surprising when you consider that the CaaS asset class originated in the region.
Demographic tailwinds
Bolstering the attractiveness of CaaS in APAC is the growth of middle-class consumers in the region. Oxford Economics posits that two in every three middle-class consumers will be in APAC in 2029, with China and India adding a further 110 million households to their middle classes.
With deeper pockets, an evergreen need to cool its built environment and governmental decarbonisation ambitions, the popularity of CaaS in APAC is only set to grow.
And as the data centre asset class becomes ever larger, with cooling critical for their myriad of servers, drives and network equipment, the case for CaaS only strengthens.
Keeping the urban population in Asia cool, bringing sizeable decarbonisation gains and delivering cheaper, on-demand services for landlords and tenants, while securing a return on investment for investors, CaaS is on an upward trajectory.