Market Overview
Tokyo continues to attract further investment, beginning with the entry of Zoho, ST Telemedia Global Data Centres, and Stack Infrastructure, with their initial local projects bringing the under-construction total in-market capacity to more than 183 MW. We note their target tenant profiles are shifting toward hyperscale tenants, typical cloud service operators promoting their extended platforms to both public and private infrastructure. While hardly a low-cost market for land acquisition, land remains available for major builds, a considerable advantage in comparison to rapidly constrained markets regionally and globally. Elsewhere, NTT, the world’s third-largest global data center provider after Equinix and Digital Realty Trust, opens the largest project in Indonesia with the capacity totaling to 45MW as well as a 6MW data center in Vietnam. It also has announced a strategic partnership with Macquarie Asset Management for accelerating further data center developments in Europe and the U.S. Macquarie has acquired a majority share in several of NTT’s DC holding companies in the markets for approximately JPY100 billion, while NTT maintains around 25-49% ownership.
Ecosystem Developments
- The cabinet office has announced an investment of JPY5.7 trillion (US$46.8 billion) in fiscal 2022 for accelerating rural-urban digital integration under the "Digital Garden City State" vision. The vision includes constructing more than a dozen regional data centers in approximately five years, completing the nation-wide submarine cable network in three years, and bringing fiber optics into universal service by 2030. The planned digital infrastructure will become the foundation of basic nationwide public services such as Mobility as a Service or MaaS.
- GLP has announced it will invest JPY1.5 trillion (US$12.3 billion) to develop facilities equivalent to 900MW of data center capacity over the next five years. The company has already secured several sites in Greater Tokyo and Greater Osaka to commence the construction of facilities equivalent to 600MW from 2023.
- Daiwa House Industry has launched a data center brand, DPDC (D Project Data Center). By 2025 the company aims to build 14 data centers with a total floor area of approximately 330,000 sq.m. (3.55 million sf) at DPDC Inzai Park in Inzai, Chiba Prefecture. The company also plans to invest JPY100 billion (US$815 million) by 2025 to develop several data centers in other submarkets in the country.
- Zoho, headquartered in India, Singapore’s ST Telemedia Global Data Centres (STT GDC), and Stack Infrastructure from Colorado, USA, have announced their first entries into the Japan data center market. Zoho opened two locations in Tokyo and Osaka in February 2022. STT GDC will open two data centers with totaling 60,000 sq m (645,600 sf) with combined capacity of 60MW in Goodman Business Park in Inzai.. Stack is developing a two-building 36MW campus in Inzai. Planned delivery for the projects will be after 1H 2024.
- Australian micro data center firm Zella DC has deployed its first micro data center in Japan at IIJ’s Shiroi Data Center Campus in Chiba Prefecture. A tiny outdoor unit is complete with essential DC components such as UPS, cooling systems and physical security. It can be installed anywhere, including the rooftops of existing buildings, and function as an emerging Edge computing platform for 5G infrastructure companies.
Sales & Investment: Foreign investors’ demand lifting prices for acquisition
In December 2021, Digital Edge added five new data centers from ITC data service company Itochu Techno Solutions, for JPY26 billion (US$2.6 billion) at a unit price of US$275 per sf1. Located in Tokyo, Yokohama, and Kobe, the company’s new acquisition of 18.5MW will grow the company’s total capacity in Japan to 38MW. Elsewhere, Lendlease has launched its first hyperscale joint venture with Princeton Digital Group for JPY74 billion (US$600 million) with 80% of the fund capital allocated to external investors.
Market in Focus: Cloud service operators
The cloud services market grew 42.1% between 2019 and 2021 and is forecasted to further expand at around CAGR 20% over seven years until 2027. According to the latest survey by the Development Bank of Japan, about 65% of companies have adopted cloud services for their data center operations in 2020, increasing the growth prospect for cloud service operators.
We expect cloud service operators to drive increasing demand growth over the next five years.
- Amazon Web Services (AWS) and Google Cloud Platform (GCP) jointly won a contract from Japan’s Digital Agency for its cloud computing project to accelerate digital transformation of public infrastructure, following their prior mandate to support the Israeli Government. The mandate would expand into eight municipalitiessuchasKobeandMorioka. AWS and GCP both met the Agency’s 350 requirements
which include security, data management, and BCP such as Data Center locations and specifications. - Google Cloud Japanhas signed a strategic partnership with Mizuho Financial Group, the third-largest megabank in Japan in March 2022. Two companies will build a new digital marketing platform integrated with Google Analytics and digital financial services.
1 Source: RCA
