ESR Takes on Second Data Centre in Japan With 20MW Tokyo Project 

ESR is developing a new 20 megawatt data centre facility in western Tokyo as it expands a digital infrastructure presence first established in the country one year ago.

The Hong Kong-listed logistics specialist said in a statement on Wednesday that it has acquired a 20,900 square metre (225,000 square feet) site in western Tokyo’s Higashikurume City to build a new server-hosting facility that will service existing data centre operators and new market entrants in the area.

“As the largest new economy real estate platform in APAC, ESR continues to accelerate the expansion of our digital infrastructure ecosystem across APAC,” ESR co-founders and chief executive officers (CEO) Jeffrey Shen and Stuart Gibson said in a joint statement. “As a group, we will continue to leverage our hyperlocal presence that provides unparalleled access to unique land sourcing, zoning and power approvals as well as best-in-class development expertise to differentiate ourselves from our peers.”

The new project marks ESR’s second data centre in Japan after launching the new business in line in April 2021 with a 98 megawatt development in Nanko, Osaka, as the firm broadens its mission beyond its roots in the warehouse sector.

Going Online in 2025

ESR plans to knock down the three existing buildings on the site to make way for a new data centre facility which is slated to open in September 2025. A company representative declined to reveal the compensation paid for the site or the identity of the seller.

Diarmid Massey – who joined ESR in February as chief executive of its data centre business – noted that Japan has been rated as the third most attractive location for data centres globally, thanks to its growing appetite for data services, large market size and extensive penetration of mobile broadband.

Formerly a senior vice president with US data centre giant Equinix, Massey said establishing a presence in the Japanese capital is a “highly important strategic” play for institutional investors like ESR.

“Tokyo is the primary hub for international firms to access the Japan market. Its geographical location as the most prominent technology and financial market situated in the northwestern part of Asia has resulted in it becoming the first landing point for a sizable number of submarine cables to connect the western United States to the rest of Asia,” said Massey.

Located in a nexus for data centres in Japan’s largest city, ESR’s Tokyo project benefits from strong connectivity to city-wide fibre networks, according to Devashish Gupta, chief investment officer for the firm’s data centre business. Gupta said the upcoming facility should provide additional load capacity for both new and existing data centre operators expanding their presence in western Tokyo.

Data Centres in Focus

With logistics dominating its $140.2 billion in assets under management, ESR has rapidly stitched together a pipeline of data centre developments across the region which by the end of 2021 had a combined potential capacity of 1,200 megawatts.

“Beyond the continued growth of e-commerce, digital transformation is well underway, with data consumption growing by four times over the past five years alone in Asia,” group chairman Jeffrey Perlman said in presenting the company’s annual earnings report last month. “With the build up of the ESR data centre efforts, we’re looking to play into the critical need for digital infrastructure in a big way going forward.”

With the company having kicked off its data centre initiative with its announcement of the 98-megawatt data centre campus in Osaka last year, it had projects lined up in Hong Kong, Osaka, Sydney, Mumbai, Jakarta and Singapore by the end of 2021, with Perlman saying at earnings conference that ESR plans to expand that network to Tokyo, Seoul, Beijing and Taipei.

The company established its data centre toe-hold in Hong Kong in November of last year when it acquired the Brilliant Cold Storage Tower 2 in Kwai Chung from the family of the late local tycoon Tang Shing Bor for $230.8 million for conversion into a 40MW facility.

Japan Central

The announcement today was paralleled by a statement from Hong Kong fund manager Gaw Capital Partners, which revealed that it had acquired a building in the Greater Tokyo area for its own conversion project.

Having acquired the Fuchu Building in Fuchu City’s Fuchu Intelligent Park on behalf of a fund under its management, Gaw Capital says it will combine this latest asset with an adjacent property which it purchased last year, to create a 39MW data centre.

Also pursuing a Japanese digital infrastructure strategy is ESR’s industrial competitor, GLP, which announced in February that it plans to invest at least $12 billion in the country’s data centre market in the next five years.

In January, US hyperscale specialist Stack Infrastructure and global investment firm Oaktree Capital Management had also entered the local market with a 36 megawatt development in Chiba prefecture.

A joint report by Knight Frank and DC Byte showed Japan remained Asia’s biggest data centre market with over 1.9 gigawatts of potential capacity as of end-2021, with the country already accounting for a quarter of Asia Pacific’s 7.9 gigawatts of potential load.