ESR Cayman Limited, the largest Asia-Pacific focused logistics real estate platform, today announced it has acquired a data center asset and developable land in Osaka, Japan to build a campus with 78 megawatts of power capacity and a gross asset value (GAV) of $2.15bn.
Data Center Campus in Osaka, Japan – ESR Cayman
Overall, ESR Cayman’s 78-megawatt campus in Osaka, Japan will be formed over three buildings. Firstly, the company will re-develop an existing data center at the site into a facility with 39 megawatts of power capacity, upon expiration of the current tenant’s lease. Secondly, ESR Cayman will develop two additional buildings on adjacent land, with a combined 39 megawatts of power capacity. Indeed, the first data center will commence development during 2021, with a target completion date in 2023.
In aggregate, this 78-megawatt campus in Osaka, Japan will have a potential gross asset value (GAV) of $2.15bn. However, the precise investment amount from ESR Cayman will depend on whether the company signs leases with tenants that desire a powered shell or a fully-fitted configuration, for each of the three buildings.
ESR Cayman is acquiring a data center campus located in Osaka City, within 6 miles (10 kilometers) of the Osaka CBD. Indeed, the Osaka CBD is where Japan’s major Internet Exchange and other network exchanges are located. In turn, these exchanges attract a significant number of cloud on-ramps, telecom companies, IT-dependent enterprises, and hyperscale customers.
ESR Cayman is targeting both hyperscale customers and colocation operators for its Osaka, Japan campus. Specifically, the operator will offer customers a choice between leasing data halls, individual buildings, or multiple buildings.
Data Center Strategic Initiative – ESR Cayman
ESR Cayman’s data center acquisition in Osaka adds to the group’s strategic push into data centers. Overall, the company now has exclusivity on land and power approvals to potentially develop 200+ megawatts of power capacity, across five major markets in Asia-Pacific. Specifically, these markets include Japan, Singapore, Hong Kong, India, and Australia.
Global Data Center Market Size by Power Capacity – Highlighting Asia
Additionally, ESR Cayman plans to expand its data center platform with select operators and co-investment partners. The company’s intention is to build a comprehensive network of data center infrastructure in key metros across Asia-Pacific. Specifically, these facilities will include both powered shell and fully-fitted configurations.
Finally, ESR Cayman notes that it has a large and diverse logistics portfolio. In turn, this portfolio could hold potential opportunities to re-develop logistics sites into data centers.
Data Center Demand Sources – Customers and Investors
ESR Cayman has seen a significant increase in demand for data center capacity from its existing logistics customer base, and particularly from its customers in the e-commerce sector such as JD.com and Cainiao.
Additionally, ESR Cayman’s limited partners (LPs), which invest in its funds, have become increasingly interested in investing in data centers. Indeed, today’s announcement by ESR Cayman in Osaka, Japan could be a data center co-investment opportunity for its LPs.
ESR Cayman – Overview
ESR Cayman is the largest Asia-Pacific focused logistics real estate platform, with assets across China, Japan, South Korea, Singapore, Australia, and India. At year-end 2020, ESR Cayman had $30bn of assets under management (AUM). Overall, these properties, which are both completed and under development, comprise 215+ million sqft of gross floor area (GFA).
ESR Cayman was co-founded by its senior management team and global private equity firm Warburg Pincus. Additionally, ESR Cayman and the funds & investment vehicles it manages are backed by well-recognized institutional investors. Specifically, these investors include APG, SK Holdings, JD.com, CPP Investments, Oxford Properties, and PGGM.
Osaka, Japan – Data Center Market In-Focus
Osaka is the fifth largest data center market in the Asia-Pacific region (excluding China). However, the supply of data centers remains limited due to a lack of land and power supply. Indeed, this trend has not gone unnoticed by the largest publicly-traded data center operators like Equinix and Digital Realty. Both of these companies are making significant investments in Osaka, Japan, as shown below.
In Osaka, Equinix is developing data center capacity through both its Asia-Pacific hyperscale joint venture with GIC and via its wholly-owned development pipeline. Specifically, Equinix and GIC are investing $156m into Osaka 2, which is part of its xScale joint venture. This facility will comprise 10 megawatts of power capacity once it opens in Q4 2021.
Additionally, Equinix is spending a further $55m through its Osaka OS3 Phase I development. Specifically, through this build-out, Equinix will add 900 sellable cabinets of power capacity to its Osaka footprint by Q4 2021.
Digital Realty is also developing a facility in Osaka which the company expects will be complete in Q3 2021. Overall, the company is investing $186m to build-out a 194k sqft data center.