ESR Starts $1B Final Phase of Greater Osaka Logistics Park With Domestic Capital Boost

ESR has broken ground on the $1 billion final phase of a Greater Osaka logistics park, drawing on capital raised for the industrial giant’s first domestic fund in Japan.

ESR Kawanishi DC3 will provide 433,000 square metres (4.7 million square feet) of gross floor area, making it the group’s largest-ever project, ESR said Wednesday in a release. The nine-storey facility is among the biggest logistics projects developed in Japan with third-party institutional capital, the Hong Kong-listed builder and fund manager said.

The effort brought together 14 domestic investors and an existing European capital partner to raise $245 million to fund the development, which is the third building and final ready-built facility at ESR Kawanishi Distribution and Techno Park. The 50 hectare (124 acre) complex in the Hyogo prefectural city of Kawanishi, northwest of Osaka, began construction in July 2023.

“ESR Kawanishi is the most accomplished realisation of ESR’s product vision in Japan to date,” said co-founder and co-CEO Stuart Gibson. “Customer demand is markedly higher for logistics space in large-scale park developments and is set to grow even further with the current re-onshoring of manufacturing activity.”

Local Involvement Pays

ESR Kawanishi DC3 is scheduled to finish construction in early 2028. Space in the park’s first two buildings has been leased by logistics firms providing wide-area and last-mile services in western Japan, from central and northern Osaka to Kobe and the Hanshin region, ESR said.

The group’s urban planning team worked with Kawanishi officials to rezone the site for a full-service, large-scale logistics estate, Gibson said. ESR vowed that subcontractors, suppliers, plant operators and job vacancies would be filled by workers and companies from communities near the sprawling site, which had been eyed by many developers for decades.

“Given the dearth of suitable zoned land, the strategic decision we made years ago to form an in-house team dedicated to land sourcing and rezoning enables us to offer our capital partners access to such investment opportunities,” Gibson said.

ESR Kawanishi’s last land parcel will cater to build-to-suit uses like hazardous materials facilities and automated high-bay warehousing, with the building’s design featuring a battery energy storage system, solar panels and LED lighting to ensure sustainability.

The majority participation by Japanese capital in the equity funding shows strong investor confidence in the project, said Pierre-Alexandre Humblot, a managing director with ESR’s fund management and capital division.

“Repeat involvement of domestic investors will make ESR’s project funding more resilient,” Humblot said. “It will also bring our foreign investment partners privileged market and governance insights that position them ideally to capitalise on the unique opportunities offered by the Japanese private assets market.”

Japan Digital Infrastructure

ESR is launching the last phase at Kawanishi after bringing in a partner earlier this year to help get the group’s Osaka data centre campus to the finish line.

ESR and US developer CloudHQ will jointly build, fit out and operate the $2 billion Cosmosquare project to deliver 130 megawatts of data centre capacity in three phases, the partners announced in January. San Francisco-based CloudHQ has developed 12 hyperscale data centres totalling 1.1 gigawatts worldwide.

ESR completed the core and shell of Cosmosquare’s first phase, OS1, last August and plans to open the 25MW facility for service in June after the full fit-out. No timeline was given for the complex’s latter phases.

Cosmosquare is part of Warburg Pincus-backed ESR’s accelerated strategy to execute 575MW of committed data centre sites across key Asia Pacific markets. Last May, the group announced the groundbreaking of its fourth data centre location in Japan, a 60MW facility in Tokyo’s eastern Koto ward, boosting the company’s pipeline of projects in the country to 320MW.

A consortium of investment firms including Starwood Capital, Sixth Street Partners, SSW Partners, the Qatar Investment Authority and Warburg Pincus announced a binding offer in December to buy out ESR in a deal valuing the developer and fund manager at nearly $7.1 billion. Last month the group posted a full-year loss for 2024 of $726.3 million, stemming mainly from marked-to-market losses in asset and project valuations.