Japan Real Estate Developers Boosting Data Center Projects

Tokyo, Sept. 14 (Jiji Press)–Major real estate developers in Japan are stepping up their data center development, as further growth is expected on the back of an artificial intelligence boom. According to the communications ministry, the data center-related market in Japan is expected to exceed 5 trillion yen in 2028. As friction with nearby residents, particularly in urban areas, is increasing over data center construction projects, the developers hope to leverage their expertise accumulated through land transactions and redevelopment projects to facilitate smooth expansion of their data center businesses. Daiwa House Industry Co. plans to build a total of 14 data centers in Inzai, Chiba Prefecture, east of Tokyo, and will start construction of its fifth data center in late September. The company also developed a modular small data center, which involves manufacturing some components at factories and assembling the structure on-site. The first such facility was built in April in Okuma in the northeastern prefecture of Fukushima. The company plans to establish a system that covers all necessary processes from securing land for data centers to completing construction. “We want to be able to cover (data center) operations and management” in the future, Katsunori Nobe, a senior executive officer of Daiwa House, said. Following its acquisition of Sumitomo Densetsu Co., which specializes in providing integrated construction services, such as electrical and air-conditioning systems, Daiwa House will consider collaborating with the company on data center construction. Mitsui Fudosan Co. plans to invest over 600 billion yen in data center-related projects by fiscal 2035. Data center development projects are underway in Sagamihara in Kanagawa Prefecture, Hino in Tokyo, the Japanese capital’s Tama region and the Hokusetsu area in Osaka Prefecture. “Our pace of acquiring investment opportunities has been faster than expected,” a company official said. For the project in Hino, which will utilize the site of a former factory of automaker Hino Motors Ltd., Mitsui Fudosan revised its data center plan based on talks with the local government. Taking sunlight flowing into residential areas into consideration, the height of the data center building was lowered from the original 80 meters to 63.5 meters. While construction work will start in October, the company will continue discussions, as residents are concerned about the waste heat generated from the building. Some real estate developers have recently entered the data center market. Mitsubishi Estate Co. established a data center operations office in April and is already funding several deals. A data center in Ishikari in the northernmost prefecture of Hokkaido, in which Tokyu Land Corp. participated in development for the first time, began operations in August, running entirely on renewable energy. The company is also working on a new project in the western city of Osaka. Data center development in the country has traditionally been led by telecommunications and information technology-related firms. Asked why major real estate companies have started to enter the data center development market, Takaumi Tamura of Deloitte Tohmatsu LLC said, “They have likely judged that (data center operations) were an extension of their existing tenant operations.” “While securing electricity is a prerequisite for (data center) development, real estate companies will likely come up with plans that contribute to urban development, which is something that they are good at, such as setting up on-site parks,” Tamura said. END [Copyright The Jiji Press, Ltd.]