Japan Emerges as a Strong Data Centre Hub

A benefit of geographically dispersed sites, reliable power and higher digital adoption, have all contributed to a slew of data centre players renewing their ambitious plans for the region. Data centre providers have rediscovered ‘Irasshaimase’ – which in Japanese traditon means ‘welcome customers’.

The who’s who of providers have extended their warm welcome.

Hyperscale data centre specialist, AirTrunk recently opened its Japan headquarters in Shibuya, Tokyo. This development comes in the wake of AirTrunk’s plans of opening its first hyperscale data centre in Japan. Dubbed AirTrunk TOK1 in Inzai, it set to be the largest in the country by megawatts (MW), according to company officials.

AirTrunk is backed by Macquarie Asia Infrastructure Fund 2 (MAIF2), along with its partners, including Public Sector Pension Investment Board (PSP Investments), acquired a major stake in the business in 2020, investing alongside AirTrunk’s Founder and CEO Robin Khuda.

MAIF2 is managed by Macquarie Infrastructure and Real Assets, one of the world’s leading alternative asset managers and part of the ASX-listed Macquarie Group Limited. AirTrunk Founder and CEO, Robin Khuda, said that the new office is a critical step in AirTrunk’s expansion in Japan and the broader Asia-Pacific region as it grows its data centre platform to support rapid digital acceleration.

“Today marks a major milestone in the AirTrunk story as we officially open our new corporate office in Japan to accommodate our fast-growing Japan business now and into the future. Our new Japan headquarters in Tokyo demonstrates our commitment to growing in this strategic market as we continue to expand our data centre platform and investment in Japan,” stated Khuda.

“In the next five years, cloud adoption in Japan is expected to grow by 12 per cent CAGR, accelerated by COVID-19 and driven by the rapid enterprise migration from on-premise and traditional data centres to the cloud. Hundreds of megawatts of enterprise data will need to be migrated to the cloud, enabled by critical digital infrastructure including hyperscale data centres like AirTrunk TOK1,” he added.

Hello Tokyo

Investment firm Mitsui & Co. is expected to invest a total of 300 billion yen ($2.7 billion) by 2026 in the development of new data centres and plans to acquire existing facilities. Colt Data Centre Services (Colt DCS) has commenced construction of its next hyperscale data centre with a ground-breaking ceremony in Japan.

This 42,000m2, 45MW facility will be located in Keihanna Science City, in the Kansai area, the company said. The site will be ready to service Colt DCS customers in early 2023.

Following the 2011 earthquake in Japan, many companies realised the benefit of geographically dispersed sites and so there is a large demand for data centres near Osaka as an integral part of disaster recovery plans.

This development needs to be seen in the context of Fidelity and Mitsui’s joint venture looking to invest 300 billion yen ($2.7 billion) by 2026 in the development of new data centres and provide advanced hyperscale data centres in Japan, with potential further growth in APAC.

Post the COVID-19 pandemic, organisations across the world have increased their digital adoption, as a result of remote work and restrictions placed on people movements.

The facility will employ state-of-the-art cooling technologies to ensure high efficiency, while supporting Colt DCS and its clients’ sustainability targets.

“Mitsui is very pleased to celebrate the ground-breaking for the first data centre project in Keihanna. Starting with this exciting project, Mitsui hopes to further strengthen our partnership with Fidelity and Colt for our JV.” commented by Shinsuke Waka, GM of Financial Business Division, from Mitsui & Co.

“There has been a surge in cloud service demand throughout Japan, all of which requires carrier-neutral network access in the region, as well as disaster recovery sites,” stated Quy Nguyen, Vice President, Global Accounts and Solutions.

“Combined with the fact that the Kansai region of Japan has a population of around 22.4 million, generating enough GDP to position itself at the same level as the Top 20 countries, we expect this facility to be a key site for Colt DCS,” he added.

“The acquisition of this site is another stake in the ground for us, demonstrating the momentum of our hyperscale strategy and cementing our foothold in APAC,” added Padraig MacColgain, Vice President, Head of APAC at Colt DCS.

Similarly, Australia’s real estate group Lendlease plans to invest A$800 million (US$600 million) to build its first data centre in Japan.

Located in Greater Tokyo, the facility is sited on approximately 323,000 sq ft of land and will operate under Lendlease Data Centre Partners (LLDCP), the ASX-listed company said. Andrew Gauci, managing director of Japan and head of telecoms and data infrastructure Asia, Lendlease, said: “The demand for data centres in the Asia Pacific is set to grow exponentially, with internet-related services usage soaring due to the pandemic. We are excited to launch our first data centre development under Lendlease Data Centre Partners.

“This project is of significant scale in a sector of growing importance in the digital economy, leveraging our more than 20 years’ experience in the local communications and data infrastructure space, as well as Lendlease’s broader presence in Japan for over 30 years.”

Lendlease’s chief executive for Asia, Justin Gabbani, said: “This partnership is an exemplar of our updated strategy in action, leveraging our competitive edge and creating value with our partners. With our end-to-end integrated capabilities, we look forward to building on this to explore further investments in the future.”

Lendlease said that the construction will begin later this year with the initial phase to be completed by early 2024. Singapore-based Princeton Digital Group (PDG) today announced its plan to build one of the largest hyperscale facilities in Tokyo, Japan, with a total investment value of USD 1 Billion. Japan is the fifth market that the company has entered in since its formation 4 years ago. With this investment, PDG marks a major milestone in its plan to build a 600 megawatts (MW) portfolio across the region.

Another operator AirTrunk announced that its new Tokyo headquarters is located close to a range of customers innovating across a broad range of disciplines, including corporate, design, engineering, project management, construction, EHS and operations.

AirTrunk’s Head of Japan, Nori Matsushita, is responsible for leading the company’s rapid growth in Japan.

“A year ago, we announced our plans to build the largest data centre in Japan, TOK1 in Inzai. Over this time, we have continued to build our local team of hyperscale data centre experts who have made huge progress in preparation for the data centre launch later this year,” said Matsushita.

Further expansion

AirTrunk said that development is well underway at the company’s first hyperscale data centre in Japan, designed for large cloud service providers, technology companies and large enterprise customers. Set to open in late 2021, TOK1 will be the largest and most efficient data centre in Japan, complete at over 300+ MW of IT load and an industry-low power usage effectiveness of 1.15, delivering significant energy efficiency.

TOK1 will be the newest addition to AirTrunk’s growing hyperscale data centre platform, which includes five other facilities in Western Sydney (130+ MW), Sydney North (110+ MW), Melbourne (130+ MW), Singapore (60+ MW) and Hong Kong (20+ MW).

Digital Edge Singapore Holdings Pte. Ltd. announced the addition of two data centres in Japan. “Our goal is simple: to build an exceptional data center platform that enables customers to easily, efficiently and economically deploy their infrastructure to capture the business opportunities that Asia offers,” said Samuel Lee, Chief Executive Officer of Digital Edge.

These data centres will be in Tokyo and Digital Edge has signed agreements to acquire ComSpace I and ComSpace II – two fully-operational data centres located in downtown Nihonbashi and Shinjuku respectively – from ARTERIA Networks Corporation.

This is the Singapore-based data centre platform provider’s third project in Japan and fourth in North Asia since its inception in 2020. Further, the acquisition will boost the company’s regional footprint to a total of six data centres in four key metros.

Digital Edge is backed by Stonepeak Infrastructure Partners, and has in excess of US$1 billion in committed capital to establish and drive its data centre platform in Asia.

Another APAC-focused real estate and logistics company ESR Cayman Limited (“ESR”) acquired a data centre campus in Osaka, Japan, which it will further develop by pumping in $2.15 billion. The facility is located within 10km of Osaka City, where major internet exchange and cloud corporations in Japan are located. With excess land and a development potential of up to 78 Megawatts (MW), ESR plans to construct two additional buildings with a combined power load of 38 MW.

Jeffrey Shen and Stuart Gibson, co-founders and co-CEOs of ESR, note that the acquisition adds to the company’s strategic data centre push, which includes land exclusivity and power approvals to potentially develop over 200 MW of data centres across major markets in the APAC region.

“ESR has a proven track record of consistently developing world class assets and delivering world class project management to our logistics tenants, many of whom are e-commerce giants who also offer cloud services,” they added.

“Our operational expertise enables us to offer cloud service providers and operators in all major APAC economies from a single source solutions that meet their needs and requirements beyond the optimization of business performance and growth.”

Commenting on the area of sustainability in their ventures, Shen and Gibson explained that ESR will work with cloud providers to ensure that carbon reduction and responsible innovation are at the heart of all developments at ESR’s data centres. Construction of the first building is scheduled to begin this year, with completion expected in 2023.

If we were to go back to 2020, a significant deal worth more than US$1 billion to build hyperscale data centres in Japan has been signed between Equinix and Singapore’s sovereign wealth fund GIC. The joint venture will develop three xScale data centers, one in Osaka and two in Tokyo.

The country’s public cloud market is predicted to reach US$20 billion in 2024 with an annual growth rate of 19 per cent. With such strong tailwinds, Japan is one of the hottest contenders for becoming a data centre hub of the region.

Venkatesh Ganesh

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