Mitsui Fudosan will develop the core and shell of the data centre, while KDCF II will undertake the fit-out works by leveraging the operating and technical know-how of Keppel’s operating division, Keppel Data Centre & Networks (Keppel DC&N). KDCF II will also appoint Keppel DC&N as the facility manager of the data centre in Western Tokyo, when the construction is completed.
It is envisaged that once the data centre is stabilised, it could be a pipeline property for Keppel DC REIT.
Interestingly, the KCDFII transaction means that Keppel gets in at the construction stage in the forward purchase, which could offset the currency impact of a weak JPY. It would have been interesting for Keppel DC REIT’s unitholders if Keppel DC REIT could have taken a stake in KCDFII and reap some benefits from the development stage. KDCFII has developed data centres in Shanghai and Beijing.
Japan is an attractive market for data centre REITs. According to the latest research by Statista, revenue in the Japan Public Cloud market is projected to reach US$21 illion in 2024 and expected to grow at a CAGR of 12% from 2024 to 2028 resulting in a revenue of US$34 billion by 2028. This growth in cloud adoption will ensure a resilient demand for more data centres, including demand from the hyperscale data centre market. Japan is also at the Asian end of a number of trans-Pacific cables running between the Americas and Asia.
See also: BlackRock sees growth in Asia infrastructure on AI boom
In May 2023, Mapletree Industrial Trust acquired a data centre in Osaka for JPY52 billion or $507.9 million at the time.
Separately, Digital Core REIT announced in Novemenr 2023 that it is acquired a 10% stake in a data centre in Osaka for JPY7,725 million.
Japan is one of the few countries where a positive carry still exists between property yields and cost of debt.