Greater Tokyo data centre pipeline reaches 2,544 MW

Japan’s data centre demand stays strong as power constraints tighten.

Japan's data centre market continues to attract strong occupier and investor demand, driven by hyperscalers, AI workloads and cloud services, but limited power availability and rising development costs are increasingly shaping new projects,according to CBRE.

In a recent report, CBRE said hyperscale demand had expanded steadily over the past three years and now accounts for about 60% to 70% of total capacity demand in Japan.

AI-related demand is being driven mainly by global cloud service providers, supporting AI inferencing and deployment pipelines, while direct demand from local enterprises remains relatively limited, the report said. Colocation demand is also being supported by domestic corporates, particularly manufacturers and semiconductor companies, as well as regional and local cloud providers seeking capacity for GPU-based design and AI workloads.

Leasing conditions remain tight. CBRE said rack pricing increased by about 3% in 2025, primarily because of rising electricity costs and limited new supply. Occupancy across new and stabilised assets remains high, with much of the new supply in Greater Tokyo in 2025 effectively pre-leased.

Power availability is emerging as a key constraint, particularly in Greater Tokyo, where most new capacity is being privately pre-leased and several projects have been deferred, CBRE said. Fukuoka and the wider Kyushu region are emerging as alternative locations, supported by lower power and land costs and improving submarine cable connectivity.

Investor demand remains strong, supported by Japan's mature data centre market, depth of demand and liquidity. CBRE said data centre operators and cloud service providers remain among the most active investors, particularly in land acquisition and platform expansion.

However, higher financing and development costs are putting pressure on project margins. Institutional investors are increasingly shifting from opportunistic strategies towards core-plus investments, while tighter bank lending standards are affecting construction financing and increasing refinancing risks. CBRE said demand for infrastructure debt is consequently rising.

Recent transactions highlight continued investor appetite. A joint venture between CapitaLand Ascendas REIT and Mitsui & Co Realty Management acquired a 4.5 MW hyperscale data centre in Greater Osaka for US$997 million, with the facility fully leased to a leading global hyperscaler for 14 years and subject to built-in annual rent escalation.

Keppel DC REIT and Keppel DC also acquired a 20 MW hyperscale data centre in Greater Tokyo for US$533 million, at an estimated 4.1% yield, according to CBRE.

The report said the race for power is intensifying as developers plan larger facilities to accommodate AI workloads. Enquiries in Greater Tokyo are seeking 200 MW to 300 MW of capacity, with some prospective users considering locations outside traditional data centre clusters.

Demand is also increasing for higher-specification site infrastructure, including on-site cogeneration solutions to improve power resilience. CBRE said strategic infrastructure partnerships will be important to managing development timelines and delivery risks.

Microsoft has committed US$10 billion between 2026 and 2029 to expand AI infrastructure in Japan, while also working with the government on cybersecurity and with local firms to train one million engineers and developers, CBRE said.

As of the first quarter of 2026, Greater Tokyo had 1,086 MW of total data centre capacity, with 2,544 MW of upcoming capacity, according to CBRE. The consultancy expects vacancy and colocation prices to rise in 2026, while its indicative cap rate range stands at 3.35% to 4.35%.