LOGO

The Kansai region, centered on Osaka, is a rapidly growing market for data center businesses, second only to the Tokyo metropolitan area, which is the largest in the Asia-Pacific region. As corporate DX (digital transformation) progresses, there is a wide range of demand not only from local companies but also from domestic and foreign companies.

New data center rush

In 2019, NTT Communications (NTT Com: NTT Com) opened the largest data center in the Kansai region in Ibaraki City, Osaka Prefecture.

In February 2023, MC Digital Realty, a data center joint venture between Mitsubishi Corporation and Digital Realty, will open a new data center in Osaka.

In the past two months, Asian real estate company ESR Group has started construction of a 19.2MW data center in the Osaka area. Optage Inc. has announced plans to build a 14-story carrier-neutral data center, scheduled to open in January 2026.

Kansai Electric Power Co., Ltd. and U.S. company Sarai One for data center development

U.S. data center developer and operator Cyrus One has partnered with Kansai Electric Power Co., Inc. (KEPCO), a Japanese energy company, to develop new data centers in Japan.

On May 22nd, Kansai Electric Power announced that it would establish a joint venture with Cyrus One to develop data center business in Japan. Invest at least 1 trillion yen ($7 billion) over the next 10 years to build large-scale data centers called “hyperscale” with a “power receiving capacity” of 50,000 kW or more per location, which indicates power consumption, in the Kansai and Tokyo metropolitan areas. We are planning to start development and operation in the summer.

In 10 years, we aim to achieve a total power receiving capacity of 900,000 kilowatts or more, a scale that uses almost as much electricity as a single nuclear power plant.

Representative directors of the new company will be dispatched from both companies. The Kansai Electric Power Group will bring together the strengths of both companies, including know-how related to power supply to data centers and real estate acquisition, and Cyrus One’s sales capabilities to IT (information technology) companies that are data center customers. We have already secured the construction site for the first project in Kansai and plan to start construction as soon as possible.

Attention to the data center industry in the Kansai region

New data centers in the Kansai region continue to see a rush to build new facilities, and demand for these facilities is expected to continue to grow.
Kansai Electric Power’s hyperscale data center operation is likely to attract more attention to trends in the data center industry in the Kansai region.

With an increasing reliance on digital technology, the data center industry is experiencing impressive growth, is relatively immune to continued economic uncertainty, and is being viewed by investors and financial institutions as a strong alternative asset class. It’s getting attention.

Expansion of market size

According to a report published by Global Market Insights Inc., the global cloud data center market is estimated to be worth 20 billion USD in 2022, progressing at a CAGR (compound annual growth rate) of 10% from 2023 to 2032. It is projected to surpass the 70 billion USD valuation by 2032.

Efforts to promote the development of cloud computing technology are expected to be the main driver of market expansion. Projects powered by cloud computing offer integrated management, including automated problem resolution, end-to-end security management, and budgeting based on actual data usage.

Improving cloud computing infrastructure for e-administration practices has become a priority for governments of several countries, including India. These governments have also launched projects to expand their skill sets to advance digitization.

According to deployment models, the public cloud data center market will be valued at over 5 billion USD in 2022 and is expected to grow profitably through 2032.

Remarkable growth, even in Japan

Japanese telecommunications company Nippon Telegraph and Telephone (NTT) has announced plans to invest 8 trillion yen ($59 billion USD) in data centers, artificial intelligence and other “growth areas” over the next five years.

Of that, at least 1.5 trillion yen ($11 billion USD) will be spent on expanding and upgrading data centers, while at least 3 trillion yen ($22 billion USD) will be invested in digital businesses, including AI and robotics.

The company said the spending is expected to boost earnings before interest, taxes, depreciation and amortization for the fiscal year ending March 2028 by around 20% compared to the previous fiscal year, which amounts to about 4 trillion yen ($29.4 billion USD).

The Nikkei Shimbun reports that President Akira Shimada said at a press conference, “We will invest in growth areas and expand our cash-generating capabilities.”

Despite this market expansion and growth forecast, there are also challenges that weigh heavily on us.

Ukraine War, Labor Shortage and Challenges Weighing Down

Supply chain constraints, which have eased from the peak of the pandemic but have not fully resolved, are at risk of further flare-ups due to geopolitical tensions in Europe and the Asia-Pacific region.

For example, the war in Ukraine has limited the supply of neon, which is essential for semiconductor manufacturing. This supply pressure is causing delays in production. This is also due to a labor shortage, which is particularly serious in the data center field, where the problem of lack of skills and human resources is becoming more pronounced.

Employers are not only finding it difficult to find talent, they are also struggling to retain talent, with many reportedly being hired by their peers in a hot labor market. .

Another challenge hindering data center growth is the broader global economic problem. Data centers are among the top three asset classes expected to see the most growth in debt balances over the next 12-24 months, as they rely on debt to finance construction and acquisitions. Profit margins are shrinking as interest rates rise. Higher interest rates and economic instability could make it harder for businesses to make large deals.

Market expansion continues; expectations are high for initiatives in each country

Despite many challenges, the market size of the data center industry continues to expand. There is growing interest in the efforts of countries around the world to see how they can further expand while facing challenges.

As competition in data center investment and development intensifies, DC operators, DC developers and investors involved in data center business (hereinafter referred to as “DC operators, etc.”) It is desirable to utilize the CRE strategy in order to optimize the earnings of the data center business while eliminating competition with other companies as much as possible.

■ What is the CRE strategy?

“CRE” is an abbreviation of “Corporate Real Estate,” which began to attract attention in the United States in the 1960s. It refers to real estate owned by a company, and in addition to real estate such as offices, factories, and warehouses necessary for conducting business, it also includes recreation facilities, company housing, welfare facilities, and idle land.

The CRE strategy is a medium- to long-term management strategy that aims to improve corporate value by effectively utilizing such real estate.

As a specific CRE strategy, we will review current offices, rent surplus offices to third parties, and utilize idle land to develop and construct real estate for various purposes to generate stable long-term rental income. secure, etc.

In 2008, the Ministry of Land, Infrastructure, Transport and Tourism issued the “Guidelines for Implementing CRE Strategy”, which triggered the CRE strategy to attract attention in Japan. The guideline defines the CRE strategy as “a way of thinking about maximizing the efficiency of real estate investment by reviewing corporate real estate from the perspective of management strategy from the perspective of ‘improving corporate value.'” I’m here. Although the data is a little dated, the scale of CRE in Japan is said to be 490 trillion yen*, which is expected to grow further when converted to current real estate prices.

Based on the 2006 Basic Land Survey.

■ CRE strategy past and present

Before the CRE strategy was clearly recognized, it seems that corporate real estate owners chose only schemes of (1) passive abandonment, (2) simple sale, and (3) simple lending (land or building). Part of the reason could be the lack of active use of balance sheet strategies within companies and the fact that corporate property owners are not real estate professionals.

The CRE strategy has gradually been recognized, and up to now, real estate companies (developers, etc.) and construction companies have been actively approaching corporate real estate. We have successfully commercialized a large number of businesses based on CRE strategies through proposals for effective utilization and proposals for joint ventures. It is also noteworthy that the enforcement of the Financial Instruments and Exchange Law (2007) facilitated the liquidation of real estate and the entry of investors into the market.

■ Role of CRE strategy in data center investment and development

By applying the CRE strategy to data center investment and development, DC operators can enjoy the following benefits.

Understanding the intentions of corporate property owners

In addition to knowing whether you want to sell the property, whether you want to rent it, whether you want to make effective use of it yourself, whether you want to do a joint business, etc., you can also grasp the timing, so you can communicate with the owner based on trust. increase.

Avoiding Opportunity Loss and Lost Profits

Compared to real estate for other purposes, it takes a considerable amount of time to conduct a preliminary survey to determine the suitability of a data center site. For example, when participating in a real estate auction, etc., it may not be possible to make a decision within the consideration period. In addition, there may be cases where real estate investment is executed while accepting the risk of unconfirmed items. On the other hand, based on the CRE strategy, the decision-making process of the parties involved will make it easier for DC operators to select properties suitable for data centers, thereby reducing investment risk.

Optimizing investment efficiency

Data center development requires not only land acquisition funds but also huge investment funds for buildings and equipment. By utilizing the CRE strategy, the timing of funding will be advanced through discussions among the parties concerned, making it possible to avoid the problem of inefficient investment funds associated with prior acquisitions. In addition, in the SPC formation scheme for joint investment, it is possible to carefully consider the financing method and loan terms and formulate the optimal financing strategy.

Alignment of Interests of Stakeholders and Exit Strategies

The development of a data center requires a huge amount of investment funds and a considerable period of time from the completion of the DC to its stable operation. By repeating discussions that match the expectations of each of the parties concerned, the CRE strategy realizes the separation of the development party, ownership and management, and enables the construction of a final exit strategy scenario.

As mentioned above, utilizing CRE strategy in data center investment and development can be considered a beneficial approach to maximize profitability while minimizing risk.

NTT DATA Co., Ltd. is working to remote/automate equipment inspection work using robots at the data center “NTT Shinagawa TWINS DATA Building” (hereinafter referred to as “Shinagawa Data Center”) operated by the company. announced that it has confirmed that it is possible to reduce the equipment inspection work that was previously done by about 50%.

From April 2023, NTT DATA will proceed with the introduction of robots to data centers nationwide.

Background of robot introduction

NTT DATA explained that the building management industry, including data centers, is facing a serious manpower shortage, and that facility management work, in particular, is facing a shortage of skilled workers, and that there is a need for labor savings and more efficient work implementation.

Among facility management operations, the company believes that inspection work is highly effective in reducing manpower and that remote/automated operations are feasible through the use of digital technology, and has been conducting verification for practical application at its Shinagawa Data Center.

Overview of Robot Introduction and Changing Checking Tasks

In this initiative, a robot automatically patrols a predetermined inspection route, taking pictures of meters, lamps, and facility exterior, and acquiring environmental data such as odors using sensors, thereby replacing the work of measuring meters, checking lamps, and checking for abnormalities in appearance and unusual odors that had previously been performed by humans.

In this method, a single camera or sensor can be used to inspect multiple locations, and there is no need to modify the current equipment in operation, making it cheaper and simpler to achieve remote/automated operation than other methods such as installing IoT cameras and sensors for each inspection target or converting to smart meters.

The robot used in this project is a next-generation avatar robot “ugo Pro” modified for facility inspection work in collaboration with ugo Corporation, a manufacturer of business DX robots.

In order to capture detailed meter readings, the robot is equipped with a 4K camera with higher image quality than the standard model, and multiple devices such as an odor sensor, microphone, and thermo camera can be mounted on the ugo itself to expand its applications depending on the inspection items.

The robot can be operated using only a PC, and its travel route can be set with no code, making it easy for on-site personnel to use the robot. The robot can switch between automatic traveling and remote control, and can be used not only for automatic inspection work, but also for multiple applications, such as work support from a distance.

These features not only allow the robot to handle a variety of inspection items, but also to expand its applications to include remote work support and construction attendance.

By using robots and sensors to remotely/automatically perform inspection work, not only can work hours be reduced, but also the threshold values for determining abnormalities, which used to rely on human senses, can be quantified to enable detection of abnormalities without relying on skilled workers.

In addition, by making it possible to remotely perform tasks that could only be performed onsite, including work support and construction attendance, it is expected to support flexible work styles and secure new workers.

About the future

In the future, NTT DATA aims to expand the scope of automation to include recording and reporting work that currently requires personnel to perform, and to reduce the time required for inspection work by up to 80% by promoting linkage with meter reading systems and abnormality detection AI.

NTT Data will also work to enhance facility management operations, such as advanced abnormality detection and predictive maintenance of facilities, utilizing data acquired by robots and sensors.

Starting in April 2023, the initiative will be rolled out sequentially to 15 data centers nationwide.

Furthermore, based on the knowledge gained from these efforts, the company aims to offer the service commercially as a remote/automated service for facility inspection operations by the end of FY2023.

For commercial provision, ugo will utilize the new robot “ugo mini” developed by making use of the knowledge obtained through joint verification with NTT DATA to develop remote/automation solutions for facility management operations, from consulting for introduction. NTT DATA provide one-stop support from system construction to operation to solve customer problems.

The day of full-scale deployment of robots for facility inspection operations at data centers is eagerly awaited to help resolve the serious labor shortage.

On November 24, 2022, Kyocera Communication Systems Corporation (KCCS) announced that KCCS will begin construction of a zero-emission data center in Ishikari City, Hokkaido, Japan, in December 2022, with the data center scheduled to open in the fall of 2024.

In 2019, KCCS announced plans for a zero-emission data center in Ishikari, Hokkaido, which will operate on 100% renewable energy.

Subsequently, due to a change in the originally planned baseload power supply plan, the power supply configuration and data center design were revised, and now the company has announced the start of construction and opening schedule.

The data center to be constructed will be located in the Ishikari Bay New Port area of Ishikari City, Hokkaido, with a site area of approximately 15,000 square meters, total floor space of approximately 5,300 square meters (at the time of opening), and 400 racks (at the time of opening).

Toward Achieving Carbon Neutrality by 2050

In Japan, local production and local consumption of renewable energy is an important theme for achieving carbon neutrality (virtually zero greenhouse gas emissions) by 2050, as is the decentralization of data centers in the “Digital Rural City State Concept” being promoted by the government. The introduction of “real renewable energy,” which reduces environmental impact to plus or minus zero through the purchase of environmental values such as non-fossil certificates, is progressing.

To this end, expansion of “direct use of renewable energy” is also needed to further increase the amount of renewable energy introduced.

However, it is not easy to achieve “direct use of renewable energy” in large-scale demand facilities such as data centers, as securing stable renewable energy power and economic efficiency is a challenge.

Ishikari City has been selected as a “Decarbonization Leading Region (1st round)” by the Ministry of the Environment in a publicly solicited project to achieve carbon neutrality by 2050.

In addition, KCCS has formulated the “Redesigning the Region through Local Production of Renewable Energy and Decarbonization,” a measure aimed at zero carbon, and is aiming for a decarbonized industrial cluster by supplying renewable energy to the data center cluster and surrounding facilities in the Ishikari Bay New Port area.

The zero-emission data center will utilize the abundant renewable energy sources in the region, and a new solar power plant owned by KCCS will be built in the vicinity of the data center to directly utilize those renewable energy sources.

In addition, in order to operate the data center while simultaneously ensuring the “reliability,” “environmental friendliness,” and “economic efficiency” of multiple renewable energy sources, KCCS will build its own power supply and demand control mechanism utilizing storage batteries and AI technology.

KCCS aims to demonstrate the possibility of local production for local consumption of renewable energy through the “data center business operated on 100% renewable energy” in Ishikari City, as well as to contribute to regional revitalization through decentralized data storage in Japan and the creation of jobs for data center technicians and energy-related engineers. The project also aims to contribute to regional revitalization by creating jobs for data center technicians and energy-related engineers.

Expectations are high for the opening of a “zero-emission data center” to achieve carbon neutrality by 2050.

What is Water Positive

Water positive means providing more water than you consume. With freshwater shortages becoming an issue around the world, companies are making various efforts to secure water.

There are two main ways to do it: either reduce consumption or increase supply.

There are ways to reduce water consumption, such as water conservation and recycling, and ways to increase water supply, such as investing in areas and businesses with high water stress, such as water scarcity and water pollution.

AWS Committed to Reducing Water Use in Data Centers

Amazon Web Services (AWS) is the new hyperscaler that has committed to making their business water positive.

At the AWS re:Invent event held in Las Vegas, the company announced a policy to achieve water positive by 2030, returning more water to the community than it uses directly in its operations.

AWS CEO Adam Selipsky said:

“Water scarcity is a major problem around the world, and with today’s announcement by Water Positive, we are committed to doing our part to help solve this fast-growing problem.

To ensure universal access to water, we need to develop new ways to conserve and reuse this precious resource. While we are proud of what we have achieved so far, we also believe that more can be done.

We are committed to leading water stewardship in our cloud business and giving back more water than we use in the communities in which we operate. We believe this is the right thing to do for the environment and our customers. ”

The company’s efforts to achieve this goal include: analyzing water usage in real time, using IoT technology to identify and fix leaks, using recycled or rainwater for cooling, and reusing water multiple times. It includes replenishment as well as reimbursement activities, including the availability of on-site water treatment systems, and where possible, funding for waterless cooling and various water replenishment activities at the facility.

In 2021, AWS said it achieved a global Water Use Efficiency (WUE) index of 0.25L water per kWh. In Ireland and Sweden, AWS says it doesn’t use water to cool its data centers 95% of the year.

According to a US Department of Energy report, the average evaporative cooling data center WUE is 1.8L per kWh.

In the UK, AWS is working with The Rivers Trust and Action for the River Kennet to create two wetlands on tributaries of the River Thames.

“England’s rivers are national treasures and we are delighted to partner with AWS and work with our member trusts here to protect the Thames and its tributaries,” said Mark Lloyd, CEO of The Rivers Trust. said.

“AWS’ commitment to be water positive by 2030 drives the actions needed to help restore rivers and water resources impacted by climate change.

We look forward to expanding our relationship with AWS and using this partnership to demonstrate similar avenues for other companies to jointly support water management activities that improve the resilience of rivers. ”

Data centers use a lot of water for cooling, but it’s not clear how much water the industry actually uses.

Researchers estimate that on average in the US, 1 MWh of data center energy consumption requires 7.1 cubic meters of water, but this can vary widely by region and facility.

Efforts of Google, Microsoft and Meta

Google, Meta and Microsoft have committed to being water positive by 2030, but many of their facilities now use millions of gallons of water per day.

Colocation and peering service provider CyrusOne, which owns and operates over 40 carrier-neutral data centers in North America, Europe and South America, claims several of its facilities are water positive. 

Morningstar Sustainalytics, a leading ESG research, ratings, and data provider that has helped investors around the world develop and implement responsible investment strategies, previously released a report showing that Microsoft is leading the market in water conservation efforts.

European data center operators pledged to the European Commission earlier this year to reduce water usage to up to 400ml per kWh of computer power by 2040.

Due to the effects of global warming and population growth, water shortages are becoming a problem around the world. We will continue to keep an eye on the water positive initiatives of major companies.