Japan Data Center Market to Enjoy Growth Spike in 2017

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According to CBRE, demand for data centers in Japan will experience major near-term growth, driven by the growing adoption of cloud computing.
 
The Data Center: Bringing Cloud Back to Earth Report, published today by CBRE Research, estimates that demand for data centers in Japan will continue to gain traction as an alternative investment, as real estate investors look to diversify portfolios.
 
The report provides new insights into data center business models in Japan and the primary factors to consider when evaluating data centers as a real estate investment class.
 
Data centers are facilities that allow computers to be securely housed and operated with 365 day, 24 hour consistency. According to CBRE's report, other major findings include:
 

• From an investment perspective, cap rate for data centers is estimated to be 5.5% to 7.5%. It will likely attract investors seeking higher yield under the current environment where expected NOI yields have declined to record lows below 5% for traditional asset types.

• Demand for data centers in Japan is expected to see major growth, driven by the growing adoption of cloud computing. In addition to growth in the new demand, there is also likely to be demand from customers switching from obsolete data centers.

• Japanese major data center service providers have started to say that it is now difficult for them to continue investing in the real estate part of their data centers because of the high construction cost in Japan. It could become more common for land and buildings to be spun off into separate operations.