The Tokyo and Osaka data centre markets continue to push forward, with hyperscale the primary engine of growth. The Tokyo market was worth USD $2.2b in 2021 and is projected to grow 7.4% y/y to USD $2.4b in 2022, while the Osaka market was valued at USD $548m in 2021 and projected to grow 17.8% y/y to USD $645m in 2022. Hyperscale cloud makes up the majority of the current demand profile in Japan, and the hyperscale-oriented portion of the market, currently 36% in Tokyo, is expected to account for over 50% by 2026. In Osaka, this portion of the market is at about 48% and expected to reach 65% in 2026.
The demand for colocation in Japan remains healthy, but there are headwinds that have started to alter the landscape. Land for data centre development is not easy to acquire without extensive local market knowledge and there are labour shortage issues, along with multi-year backlogs in power substation infrastructure construction. Timelines for data centre builds have been pushed out as a result. These realities have pushed hyperscalers to work directly with real estate developers and has shifted some demand to the self-build and build-to-suit category. The resulting impact has been a reduction in the total addressable market for colocation providers.
But the situation is far from dire and there is plenty of upside potential left in the market. Japan is still at a very early stage of development when it comes to cloud and outsourced infrastructure adoption and there are no signs that a domestic Japanese cloud platform will be built. The major US and China-based hyperscalers continue to pursue this market aggressively and they will require capacity that exceeds what they can reasonably self-build.
The overall demand is strong enough that Japan has legitimately become a dual-hyperscale market. Not that long ago, Osaka was thought of as a secondary or disaster recovery market, but it has quickly emerged as a core hyperscale region. With two markets growing quickly, there will be plenty of opportunities for more hyperscale development.
This report is an excellent resource for any service provider, investor or enterprise end user looking to understand and project the data centre and interconnection market in Tokyo and Osaka or find a service provider.