LOGO

Japan is a country susceptible to natural disasters such as earthquakes, typhoons, and river floods. Historically, it has been crucial to manage data in locations that are resistant to such natural disasters and can minimize damage, ensuring stable operation of data centers.

Disaster-resistant locations are areas without nearby active faults, and regions not at risk of flooding from tsunamis, storm surges, or heavy rainfalls. However, recently, there has been a tendency to prioritize securing power and land in data center construction plans, while also considering disaster risks.

“ESR Cosmo Square” in Osaka Coastal Area

Suminoe Ward in Osaka City is located within 10 kilometers of Osaka’s city center and is a diverse area with commercial facilities in the coastal region, high-rise apartments in urban zones, and numerous factories in industrial areas. The ESR Group’s first data center project, “ESR Cosmo Square,” plans to construct a campus-type data center consisting of three buildings with a total IT power capacity of up to 98 MW in this area, which had previously seen no data center developments.

The buildings will be 5 stories high, measuring 40.34 meters (with a maximum height of 43.00 meters), and will incorporate disaster prevention measures such as raised floors and waterproof walls by surrounding the premises with walls.

With numerous cloud network connection points, telecommunications operators, and major IT companies concentrated in the surrounding area, and an increasing number of hyperscaler bases, a high demand for data centers is anticipated. The total asset value of “ESR Cosmo Square” is expected to reach $2.15 billion (approximately ¥314 billion), depending on the facility’s operational status.

Background: The Spread of Generative AI

The backdrop to this development includes the spread of generative AI, such as ChatGPT. According to a survey released by Mitsubishi Research Institute in May 2024, the amount of computation handled by data centers could swell to several hundred thousand times that of 2020 by 2040. Although data center operators are making efforts to improve energy efficiency, the demand surge shows no signs of slowing down.

Without prioritizing the acquisition of power and land, Japan may fall behind in global IT trends such as the evolution of generative AI.

Expecting Thorough Disaster Measures in Data Center Construction

Osaka, introduced in this case, is the second largest commercial hub after Tokyo, with a well-established population and infrastructure, making it the fifth-largest data center market in the Asia-Pacific region excluding China.

While the importance of data centers is increasing in the context of management reforms by large Japanese corporations, from a disaster prevention perspective, it is hoped that construction will proceed under meticulously prepared plans that consider all possible scenarios.

The repurposing of former factory sites of Japan’s leading manufacturers into data center locations is gaining momentum. The appeal of these sites for data center use lies in their vast land areas and ease of securing power supply. This article introduces the specific situations of these developments.

1. Marelli

Australian real estate development giant Lendlease has entered the data center business, advancing the construction of its first data center on land acquired from auto parts manufacturer Marelli in Nisshin Town, Kita Ward, Saitama City.

Lendlease, headquartered in Australia, has bases in Asia, Europe, and North America. The current facility, their first project in the data center business, has been under construction since June 2022 on Marelli’s former factory site, approximately 33,000 square meters and about 30 kilometers from central Tokyo.

The first-phase building, a six-story structure with a total floor area of approximately 30,000 square meters, is progressing with interior construction and will have an IT load capacity of 48 megawatts. The aim is to commence operations in the fall of 2024, with plans to develop a second-phase building of a similar scale on the adjacent site.

2. Hino Motors

Hino Motors has announced plans to sell part of the land at its Hino Plant in Hino City, Tokyo, adjacent to its headquarters. The sale will involve 114,000 square meters, equivalent to one-third of the factory’s site. The company is proceeding with a designated competitive bidding process, limiting the use to data center construction.

Considering the numerous residential areas around the site, the use has been designated for data centers to minimize the impact on the living environment, with bids requested from multiple companies. Some truck parts production remains on the land to be transferred, which will be moved to the Koga Plant in Ibaraki Prefecture before the land is cleared and handed over.

Due to the impact of engine fraud, Hino Motors reported a consolidated net loss of 84.7 billion yen for the fiscal year ending March 2022. The consolidated operating profit for the fiscal year ending March 2023 is also expected to decrease by 82% year-on-year to 6 billion yen, indicating ongoing difficulties.

The purpose of the land sale is to “further stabilize the financial base through the utilization of idle assets” (according to the company).

3. Sharp

Sharp announced it has signed a basic agreement, including exclusive negotiation rights, with SoftBank for the partial sale of its Sakai Plant in Sakai City, Osaka Prefecture, where LCD production will be halted by the end of September.

SoftBank plans to build a large-scale data center for the development of generative AI (artificial intelligence) using the land and part of the building, aiming to start construction in the fall of 2024 and full-scale operations by 2025.

Regarding the utilization of the Sakai Plant site, Sharp has also agreed to start discussions with KDDI and others for establishing an AI data center. Separate negotiations will continue with SoftBank regarding a different portion of the site.

Diversification of Management Initiatives

As data center construction progresses across various locations, approaches to the theme of data centers are diversifying.

It has been reported that Japan’s NEC is considering selling its data centers. Additionally, IT infrastructure and service giant NTT Data Group announced its entry into the real estate investment trust (REIT) market focused on data centers. This marks the first establishment of a data center-focused REIT by a domestic company in Japan.

The aim is to start operations in March 2026, with an expected asset size of up to 100 billion yen. NTT Data intends to utilize this new framework to capture the rapidly increasing demand driven by AI and accelerate data center construction.

The growing importance of data centers as a management theme is becoming evident in the business reforms of major Japanese corporations. As more companies are expected to plan new initiatives, we will continue to introduce these developments.