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.
According to CBRE, demand for office space in Tokyo remains stable across a wide range of sectors in 2017. One Grade A building was completed during the second quarter, with several large units still available.
CBRE is reporting that investors in Asia Pacific real estate in 2017 remain heavily focused on yield spreads when seeking assets as investment intentions, and are moving further away from capital appreciation strategies.
According to the newly released Last Mile / City Logistics Report from CBRE, the rapid rise of e-commerce has driven the most disruptive movement to the industrial & logistics industry, transforming the way we think about industrial real estate.