Japan's data centre market expands beyond Tokyo and Osaka

Japan maintains its position as the second-largest data centre market among developed nations tracked by the MSCI World Index. The country benefits from its geographic position as a connectivity bridge between North America and the Asia Pacific, minimal power outages (according to the Organization for Cross-regional Coordination of Transmission Operators (OCCTO)) and political stability (World Bank).

Nevertheless, there are considerations regarding operational resilience due to the concentration of over 80% of capacity within Greater Tokyo and Greater Osaka (Ministry of Internal Affairs and Communications (MIAC), Ministry of Land, Infrastructure, Transport and Tourism (MLIT)). Such concentration, coupled with accelerating AI deployment and increasing requirements for decarbonisation, necessitates enhanced digital infrastructure resilience. The solution may require establishing Hokkaido and Kyushu as tertiary and quaternary core hubs, while incorporating decarbonised energy to support comprehensive digital transformation objectives.

Greater Tokyo showcases a mature market with overall development pipeline growth potential of 80% (in terms of critical MW) (JLL). The East (Inzai/Shiroi) region in Chiba Prefecture leads development activity. However, reportedly planned power supply is already fully allocated through the 2030s, signalling future supply constraints. Meanwhile, the North Greater Tokyo area presents an emerging opportunity with available land banks.

Land premiums often reflect power supply availability. Data centre sites typically command substantial premiums over industrial land, with the Western Tokyo region (Tama/Mitaka) showing premiums of up to 770% over national land prices (MLIT, JLL). These figures reflect strong demand for development sites with secured power supply. Tokyo's power supply delivery timelines of between 8 and 10 years create challenges that favour developers with patient capital.

Figure 1: Development pipeline in Greater Tokyo

Source: JLL Research

Greater Osaka presents another dynamic growth story, with capacity growth projected at 170% (JLL). The market also reflects the trend towards AI data centres, as exemplified by SoftBank and KDDI's acquisition of the former Sharp Sakai Factory for approximately JPY 100 billion and JPY 10 billion, respectively for AI data centre conversion.

Power delivery timelines of 3-5 years in Osaka versus 8-10 years in Tokyo suggest competitive advantages for developers seeking faster execution. The emergence of these conversion transactions also suggests that developers are addressing development site scarcity through asset repositioning, bypassing lengthy development timelines.

Figure 2: Development pipeline in Greater Osaka

Source: JLL Research

Government policy explicitly designates Hokkaido and Kyushu as priority development regions:

Hokkaido centred in Sapporo offers advantages including renewable energy resources, a cooler climate that reduces cooling costs and substantial available land at competitive pricing. The Ishikari Renewable Energy Data Centre (15 MW, government-subsidised, Q1 2026) exemplifies these benefits through full use of renewable power supply.

Kyushu centred in Fukuoka leverages proximity to Asian markets, robust fibre connectivity to submarine cables and relatively affordable power rates. Kitakyushu Science Research Park capitalises on strategic positioning advantages. Furthermore, the APL Itoshima Site will receive support as an approved plan under the Regional Future Investment Promotion Act. 

Japan's Financial Services Agency's REIT eligibility ruling for data centre equipment transforms funding constraints into capital abundance and is expected to unlock institutional capital flows. This regulatory development coupled with mandatory energy efficiency standards requiring new data centres to achieve PUE ≤ 1.3reflect a fundamental shift addressing both technological advancement and decarbonisation. Data centres provide a platform where stakeholders, including corporates, operators and investors can simultaneously achieve Digital Transformation (DX) and Green Transformation (GX) objectives, creating a pathway to enhanced competitiveness and sustainable growth.