CapitaLand Investment Limited (CLI), a leading global real asset manager, has announced its latest expansion into the fast-growing data centre market with the acquisition of a freehold land parcel in Osaka, Japan. This move marks CLI’s first data centre development in the country and represents a substantial investment of over US$700 million (S$944.3 million). As part of the development, CLI has also secured a 50-megawatt (MW) power capacity for the facility, reinforcing its commitment to supporting the growing digital infrastructure needs in Asia.

The acquisition is a significant milestone for CLI, further cementing its position as a major player in the global data centre industry. With this latest addition, CLI has expanded its global portfolio to 23 data centres since 2021. CapitaLand Group as a whole now has 27 data centres across Asia and Europe, collectively offering approximately 800 MW of power and holding around S$6 billion in assets under management.

Strengthening CLI’s Presence in Japan

Japan has long been recognized as a critical market for data centre expansion due to its strong digital economy, robust infrastructure, and demand for cloud computing services. CLI’s decision to enter this market aligns with its long-term strategy of investing in high-growth digital infrastructure assets.

According to Mr. Manohar Khiatani, Senior Executive Director of CLI, who oversees the Group’s data centre business, this expansion marks a significant step forward in CLI’s broader investment strategy. “CLI’s data centre portfolio has expanded significantly over the last few years, and we are delighted to extend our footprint to Japan. This acquisition aligns with CLI’s digitalisation investment theme and enhances our geographical presence in Japan, one of our focus markets. Our strong balance sheet provides a distinct advantage to invest strategically in quality assets, including data centres for our future private funds.”

Japan’s data centre market has been on a steady upward trajectory, with demand fueled by cloud computing, artificial intelligence (AI), and big data analytics. Market analysts project that Japan’s data centre industry will experience a compound annual growth rate (CAGR) of 10% from 2023 to 2028, growing from US$23.8 billion to US$38.7 billion. Tokyo and Osaka have emerged as the primary hubs, with Osaka being particularly attractive due to its strategic location, availability of power, and presence of major cloud service providers such as Amazon Web Services, Google Cloud, Microsoft Azure, and Oracle.

Why Osaka? A Rising Digital Infrastructure Hub

Osaka has established itself as a key data centre hub in Japan, benefiting from strong connectivity, stable power supply, and its growing role as a backup region to Tokyo. Many companies have chosen Osaka as their disaster recovery and redundancy site, ensuring business continuity in case of disruptions in Tokyo. The presence of major technology firms and cloud service providers further cements Osaka’s position as an essential data centre location.

The increasing reliance on cloud services, AI-driven applications, and large-scale data processing is further driving demand for hyperscale data centres in Japan. Osaka’s central location, well-developed infrastructure, and connectivity to major financial and commercial centers in the Asia-Pacific region make it an attractive destination for data centre investments.

Sustainability and AI-Readiness at the Core

CLI’s upcoming data centre in Osaka will be designed with sustainability and AI-readiness as core priorities. The facility will adhere to globally recognized green building standards, including the Leadership in Energy and Environmental Design (LEED) certification or an equivalent Japanese sustainability certification.

In alignment with CLI’s commitment to environmental responsibility, the Osaka data centre will incorporate cutting-edge energy efficiency solutions. These include advanced cooling technologies, optimized airflow management, and smart temperature controls to enhance overall energy and water usage efficiency. The facility will also adopt sustainable building materials and integrate systems that use products with zero ozone depletion potential and a global warming potential (GWP) of less than 100.

The increasing power consumption of AI workloads and machine learning applications has put greater pressure on data centres to operate efficiently. CLI is taking proactive steps to ensure that its Osaka facility is AI-ready, meaning it will be capable of handling high-performance computing workloads required for AI training and inference tasks.

Institutional Investor Interest in Data Centres

The surge in digital transformation and AI-driven applications has led to a surge in investor interest in data centre assets. Recent surveys indicate that 97% of institutional investors plan to increase their overall investment in data centres, highlighting the sector’s strong potential for long-term growth.

Ms. Michelle Lee, Managing Director of Private Funds (Data Centre) at CLI, emphasized the strong institutional appetite for data centre investments: “With the rapid adoption of digitalisation and artificial intelligence globally and especially in Asia, data centre demand is expected to enjoy double-digit growth and outstrip new supply. There is strong institutional interest in data centre investments, and leveraging CLI’s global network and on-ground expertise, we have secured this off-market opportunity in Osaka with 50 MW of power. Since October 2020, CLI has successfully raised about US$600 million (S$810 million) for our data centre development funds in Asia. CLI continues to develop new data centre fund products and identify compelling investment pipeline opportunities for our private fund investors.”

The strong institutional demand for data centre assets is driven by the sector’s stability, long-term revenue potential, and resilience against economic downturns. Data centres have become an essential infrastructure component in the digital economy, making them an attractive asset class for investors looking to diversify their portfolios.

CapitaLand Investment’s Global Data Centre Expertise

CLI’s expansion into Japan builds upon its deep expertise in developing and managing data centre assets worldwide. The company has a strong track record of investing in and operating state-of-the-art data centre facilities across key markets, including Singapore, South Korea, India, China, the United Kingdom, France, the Netherlands, and Switzerland.

A key factor in CLI’s success is its ability to leverage local market knowledge and strategic partnerships. The company’s data centre teams are led by country heads with over 25 years of industry experience, supported by a global Centre of Excellence for data centres. This centralized expertise ensures that CLI remains at the forefront of data centre design, development, and operations.

One of CLI’s most notable recent achievements was its long-term agreement with a leading global hyperscaler for data centres under development in India. This agreement is expected to pre-lease approximately half of the total gross power capacity of around 250 MW across four data centre locations in Mumbai, Chennai, Hyderabad, and Bangalore. The partnership underscores CLI’s ability to attract high-profile tenants and deliver high-performance data centre solutions tailored to the evolving needs of the digital economy.

Future Outlook for CLI’s Data Centre Business

As digital infrastructure continues to evolve, CLI remains committed to expanding its data centre portfolio and seizing new investment opportunities in high-growth markets. The company’s long-term vision includes scaling up its data centre fund products, identifying strategic land acquisitions, and forging partnerships with technology firms and institutional investors.

Japan’s data centre market is expected to continue growing rapidly, driven by the expansion of cloud services, AI adoption, and increased data consumption. CLI’s entry into the market positions it well to capitalize on these trends while contributing to Japan’s digital transformation.

With the successful acquisition of its Osaka site, CLI is poised to strengthen its position as a leading global data centre investor and operator. By combining its deep market expertise, sustainable design principles, and strong investor partnerships, CLI is well-equipped to navigate the evolving data centre landscape and deliver long-term value to stakeholders.

Conclusion

CLI’s strategic expansion into Japan’s thriving data centre market reflects its commitment to supporting the global digital economy. By leveraging its extensive experience, financial strength, and sustainability-focused approach, CLI is well-positioned to meet the growing demand for high-performance data centre infrastructure.

As Japan’s digital economy continues to expand, the development of CLI’s Osaka data centre marks the beginning of an exciting new chapter in the company’s global growth strategy. With a focus on innovation, sustainability, and institutional collaboration, CLI’s investment in Japan is a strong testament to its vision of shaping the future of data infrastructure.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

4th January, 2025