ESR, CapitaLand, Nuveen, JLL See Rising Data Centre Demand in Japan, Korea: MTD TV

Real estate heavyweights ESR, CapitaLand Investment, Nuveen and JLL expect data centre demand in Japan and Korea to surge as generative AI adoption catches on in the region, according to company representatives speaking at a Mingtiandi event on Thursday.

Growing demand for rack space spurred by the debut of ChatGPT last year has led industrial specialist ESR to boost its efforts to develop more data centres in both Japan and Korea, according to Diarmid Massey, chief executive officer for the company’s data centre division.

“We believe that the AI boom is here to stay as well as the ongoing evolution to the cloud and digital transformation across industries in Asia-Pacific – not seeing the demand slowing down,” Massey said. “We’ve seen an unprecedented take up in the US in the last quarter and we’re starting to see that coming into Asia Pacific, specifically in North Asia.”

Speaking at the same forum, which was sponsored by Yardi, Patrick Boocock, CEO for private equity alternative assets and real assets at CapitaLand Investment, said the sector’s growth was already underpinned by macro tailwinds including broadening 5G adoption, cloud computing and digitalization, but the advent of more powerful AI models has been a “game changer” due to the massive data centre capacity required.

Tech Spurs Demand

In capturing that AI-driven boom, Boocock said being able to establish a global or regional platform is key to attracting hyperscale clients seeking to expand their footprints worldwide.

“Technologies are changing rapidly and those technologies may come out of the US, APAC or Europe, so having global best practices and boots on the ground in the major markets is quite important… Having that global connectivity, having fully integrated teams on the ground is highly helpful from our perspective,” he said.

Nuveen, which has made APAC a focus of its global data centre investment strategy, is also keen on expanding into Japan and Korea after purchasing a facility in Hong Kong last year.

Jing Zhou, senior director for alternatives and strategic transactions at the US investment firm, told the panel that, given the relatively small pool of existing data centre assets in Asia Pacific, her company’s strategy is to work with industry players as it looks for development projects, while also keeping watch for potential value-add and opportunistic plays across the region.

“For us as a capital provider, the path we are looking at is first, to select well-established data centre operators who have a very clear sustainability pathway and that we can work together, and certainly we will continue looking to maximise the onsite renewable energy generation if possible,” Zhou said.

The ten-year data centre veteran identified Japan and Korea as top target markets based on the volume of investment activity, ample liquidity and strong policy support, as well as relatively high levels of transparency.

Japan topped Asia Pacific in 2022 with $4.2 billion invested in new data centre projects, while Korea tied with India for the second spot with $1.9 billion committed to development last year.

Bob Tan, an executive director with the data centre practice group of JLL’s capital markets team, said during the panel that governments and utility operators in the two nations are also working actively to address bottlenecks in securing power, including renewable energy, for data centres.

“Surprisingly in both Japan and Korea, I think they have about 20 percent of renewable energy (in their power source mix), and the ability to support creation of renewable energy will be extremely helpful in the data centre equation going forward,” Tan said.

Green Infrastructure Strategies

Mingtiandi’s data centre forum will continue at 10:00 AM on Wednesday, 20 September with an interview featuring Mark Fong, chief executive of sustainable data centre specialist Empyrion DC, and James Chern, managing partner and chief investment officer of Seraya Partners, a Singapore-based private equity firm which founded the digital infrastructure startup.

During that spotlight session, MTD TV will speak with Fong and Chern about Empyrion’s mission as it expands regionally while also exploring how sustainability can be achieved in the energy-hungry data centre sector.

With that 20 September session concluding Mingtiandi’s APAC Data Centre Forum, MTD TV will return starting from Thursday, 19 October with our Office Strategies Forum, featuring speakers from CPPIB, Phoenix Property Investors, JLL, LaSalle Investment Management and Yardi.