Cloud & Data Center Convention 2023

JAPAN – A REGIONAL POWERHOUSE DATA CENTRE MARKET JULY 2023

Todd Olson Managing Director, Japan & Korea Executive Sponsor, Asia Pacific Data Centre Advisory Team todd.olson@ap.cushwake.com

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Cushman & Wakefield

60 countries

52,000 employees

Fueled by ideas, expertise, and dedication across borders and beyond service lines, we create real estate solutions to prepare our clients for What’s Next.

$10.1B * 2022 revenue *USD

5.1B sqft managed

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CORE: Services and Expertise We are working together to provide the insight and expertise our clients need to prepare for What's Next.

INDUSTRIES & SPECIALTIES

Airports Automobiles Banking & Finance Build-to-Suit Data Centers E-Commerce Education Emerging Technology Energy (Oil & Gas) Flexible Workplace Food & Beverage Global Supply Chain Government

Industry Land Legal/Professional Life Sciences/Pharmaceutical Multifamily Net Lease Investment Non-Profit Office Port/Intermodal Railroad Retail Sports & Entertainment Third Party Logistics (3PL)

Healthcare Hospitality

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GREATER CHINA

AUSTRALIA

ALEX MOFFATT Director, Logistics & Industrial, Australia

JOHN SIU Managing Director, Hong Kong

CONFIDENTLY GLOBAL, OUR PEOPLE

VIETNAM

INDIA

GAURAV PANDEY Associate Director, Leasing Agency, India

TRANG BUI General Manager, Vietnam

Our Asia Pacific Data Centre Advisory Team as part of our Global Data Centre Advisory Group, has created optimal solutions and location strategies to address highly complex IT requirements for enterprise clients across the region and globally since 2004. Our multi-disciplined team, consisting of experts across a spectrum of advisory services, focus specifically on the data centre market for seamless delivery. Every client requirement is unique; we have the experience to develop long-term strategies that drive wise investment decisions for enterprise users, colocation providers, hyperscalers, sector investors and developers.

JAPAN

TIMOTHY GREGERSEN Senior Manager, Investment Sales Data Centre Advisory

KOSUKE OGI Executive Director Data Centre Advisory

Team Japan

Team Japan

INDONESIA

KOREA

WIRA AGUS Director,

JOHN PRITCHARD Head of Tenant Advisory Group Data Centre Advisory

Industrial & Land Sales Data Centre Advisory Team Indonesia

ASIA PACIFIC DATA CENTRE ADVISORY TEAM & GLOBAL PARTNERS

Team Korea

ASIA PACIFIC

MALAYSIA

NEW ZEALAND

VIVEK DAHIYA Head of Asia Pacific Data Centre Advisory Team (APAC DCAT)

TODD HANRAHAN Head of Project & Development Services New Zealand

TODD OLSON Executive Sponsor,

PRITESH SWAMY Senior Director, Data Centres Research & Advisory, APAC & EMEA

TIFFANY GOH Country Manager, Malaysia

APAC DCAT & Managing Director, Japan & Korea

PHILIPPINES

SINGAPORE

SHIVANI JADON Assistant Vice President Data Centre & Cloud Advisory

REBECCA JUNG Associate Director, Business Development Services, Asia Pacific

BRENDA ONG Executive Director, Logistics & Industrial, Singapore

DEEPENDRA SHUKLA Director, Data Centre & Cloud Advisory

THERESE CASTRO Director, Head of Tenant Advisory Group, Philippines

EMEA

AMERICAS

THAILAND

ANDREW FRAY International Partner & Head of EMEA Data Centre Advisory Team

CHRIS CUFF Data Centre Account Management, Asia Pacific

GARETH POWELL Country Head, Thailand

JESSICA HOWE Vice President, Global Growth Verticals

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AGENDA

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THE BIG PICTURE – ASIA PACIFIC THE CURRENT STATE – JAPAN THE FUTURE – COMMERCIAL REAL ESTATE IMPLICATIONS

THE BIG PICTURE: ASIA PACIFIC

2023 GLOBAL DATA CENTRE MARKET COMPARISON REPORT 2 0 2 3 G LOBA L DATA C E N T R E MAR K E T COMPAR I S ON R E POR T

HIGH-WEIGHT

1. Fiber Connectivity 2. Market Size 3. Cloud Availability

MID-WEIGHT

4. Incentives 5. Taxes 6. Political Stability 7. Vacancy 8. Development Pipeline

1,600+ DATA CENTRES EVALUATED

63 MARKETS COVERED

32 RESEARCH SOURCES

9. Sustainability 10. Smart Cities

2023 ASIA PACIFIC TOP 10 MARKETS 01 / SINGAPORE 02 / HONG KONG

03 / SYDNEY & SEOUL*

LOW-WEIGHT

07 / MUMBAI

05 / TOKYO

06 / BEIJING

11. Power Cost 12. Land Price 13. Environmental Risk

KUALA LUMPUR 10 / *Ranking tie

08 / SHANGHAI

09 / MELBOURNE

ASIA PACIFIC MARKETS MATURITY INDEX Q1 2023 UPDATE

Beijing 2,616MW

Mumbai

2,292MW

Tokyo

2,242MW

Shanghai

2,240MW

Sydney

2,079MW

Melbourne

Johor

Hong Kong

Chennai

Singapore

Hyderabad

Seoul

Osaka 348MW

Delhi NCR

Jakarta

Guangzhou

Northern Virginia 7,625W

Pune

Bengaluru

Manila

GROWTH SCORE

Canberra Kuala Lumpur Bangkok

Perth

Busan

Taipei

Auckland

Ho Chi Minh City

Brisbane

Developing

Secondary

Established

Powerhouse

EMERGING

PRIMARY

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Source: Cushman & Wakefield Research (Q1 2023)

Cushman & Wakefield

DATA CENTRE CAPACITY: RANKING BY CITY TOP 10 CITY MARKETS ACROSS ASIA PACIFIC

Key Markets Stock, Pipeline & Vacancy %

Operational

Pipeline Vacancy % (RHS)

30%

3,000

25%

2,500

20%

2,000

15%

1,500

10%

1,000

5%

500

0%

0

Jakarta

Seoul

Singapore

Chennai

Johor

Sydney

Shanghai

Tokyo

Mumbai

Beijing

Established

Powerhouse

*Excludes developments currently at land stage

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Source: Cushman & Wakefield Research (Q1 2023)

Cushman & Wakefield

DATA CENTRE CAPACITY: RANKING BY COUNTRY JAPAN NEEDS MORE DIGITAL INFRASTRUCTURE

Cloud DC Server Room Area per Capita

Cloud DC Server Room Area per GDP GDP (2021, current $) LHS Cloud DC Area per GDP

sq.m.

0.08

1200

$20,000

0.0713

$18,000

0.07

1000

$16,000

0.06

$14,000

800

0.05

$12,000

0.0424

600

$10,000

0.04

$8,000

0.03

400

$6,000

Nominal GDP $ (2021)

0.02

0.0165

$4,000

200

0.01

$2,000

0.0033

0.0028

0.0012

$0

0

0.00

Singapore Hong Kong Australia Japan South Korea China

Singapore Hong Kong Australia

Japan South Korea

China

Source: Development Bank of Japan, World Bank, C&W Research Year ended December 31, 2021

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Cushman & Wakefield

THE CURRENT STATE: JAPAN

JAPAN: MARKET OVERVIEW

RANKING TOP 10 DC OPERATORS

Q1 2023 KEY INDICATORS*

1,099MW In operation 1,385MW Planned 1

30 / 138 No. of operators / data centres

(MW)

0

50

100

150

200

329MW Under construction

*Definition: Key indicators are based on operational Hyperscale Cloud, Colo, Edge & Telco data centre facilities in the market and excludes Captive & ICT. All values IT MW.

CABLE CONNECTIVITY & HYPERSCALERS

Tokyo

Osaka

1 Planned is defined as land ban purchase and DC development and includes all announced deals with no year limit. Source: Cushman & Wakefield Research (Q1 2023), Submarine Cable Map

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Cushman & Wakefield

POLICY INCENTIVES

DATA CENTER / DEVELOPMENT

SUBMARINE CABLE

• Develop DC in 10+ regional locations in 5 years

• Build a digital superhighway using submarine cables surrounding the islands of Japan in 3 years • Construct and disperse cable landing station to regional locations

Development plan

Existing funding (specific measures of realization)

 Ministry of Internal Affairs and Communications (MIC) Support for DC construction and projects related to distributing submarine cable landing station in regional locations (JPY50 billion). *Aid rate: 1/2, 4/5 (only for submarine cable) *Subject of support: DC (building, servers etc.), submarine cable, landing station, IX facility *Target area: outside Tokyo (submarine cables should be other than Pacific side)  Ministry of Economy, Trade and Industry (METI) Support for DC land development (JPY526 billion)

• Development of maximum 5 to 7 large scale DC locations (expect to stimulate further DC developments led by private sector)

• Completion of submarine cable network encircling Japan • Development of several new landing stations

Measure effects (such as number of possible developments)

IN FUTURE: Promote dissemination of DC, submarine cable, IX in regional locations for: o Building a robust digital infrastructure through decentralization to make Japan a data hub that can safely and securely store and process personal and sensitive information. o Revitalizing rural areas through the development of digital infrastructure and improving the efficiency of data distribution within the region.

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Source: Ministry of Economy, Trade and Industry, Ministry of Internal Affairs and Communication, C&W Research

Cushman & Wakefield

FORECAST

KEY DEMAND DRIVERS

Japan DC Market Size

JPY

Internet of Things (IoT)

7.0 T

Edge Computing Data Center Cloud Services

Forecast

5.9 T

5Y CAGR: 10.4%

6.0 T

5.2 T

5.0 T

4.6 T

Cloud Computing

4.1 T

4.0 T

3.6 T

3.2 T

2.8 T

3.0 T

2.5 T

2.2 T

2.0 T

Expanding 5G Network

1.0 T

0.0 T

2019

2020

2021

2022

2023

2024

2025

2026

2027

Financial Services

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Cushman & Wakefield

Source: Nomura Research Institute (2023) , Fuji Chimera Research (2023), Cushman & Wakefield Research

GREATER TOKYO

Q1 2023 KEY INDICATORS*

17% Vacancy rate

97 No. of DCs

874MW In operation

299MW UC

1,069MW Planned

6% Vacancy rate

CENTRAL TOKYO 366MW in operation across 58 data centres 1% vacancy rate 53MW UC / 28MW planned

INZAI

WEST TOKYO

INZAI 219MW in operation across 13 data centres 17% vacancy rate 83MW UC / 745MW planned

CENTRAL TOKYO

REST OF TOKYO 289MW in operation across 26 data centres 10% vacancy rate 163MW UC / 297MW planned

*Definition: Key indicators are based on operational Hyperscale Cloud, Colo, Edge & Telco data centre facilities in the market and excludes Captive & ICT. All values IT MW.

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Source: Cushman & Wakefield Research (Q1 export March 2023)

Cushman & Wakefield

GREATER TOKYO AREA Expect Hyperscale Demand Outpacing New Supply Reducing Vacancy to Below 15%

Hyperscale-Occupied Hyperscale - available Occupancy %

200,000

90.0%

87.4%

180,000

88.0%

160,000

86.0%

140,000

84.0%

83.1%

82.6%

120,000

82.0%

80.4%

100,000

79.8%

80.0%

# rack

80,000

78.0%

77.3%

78.0%

60,000

76.0%

40,000

74.0%

20,000

0

72.0%

2020

2021

2022E

2023F

2024F

2025F

2026F

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Source: Data Center Business Market Survey 2022, Fuji Chimera Research Institute

Cushman & Wakefield

OSAKA

Q1 2023 KEY INDICATORS*

17% Vacancy rate

33 No. of DCs

144MW In operation

12MW UC

193MW Planned

25% Vacancy rate

NORTH OSAKA 80MW in operation across 10 data centres* 33% vacancy rate 84MW UC / 0MW planned

NORTH OSAKA

CENTRAL OSAKA 64MW in operation across 23 data centres* 15% vacancy rate 12MW UC / 109MW planned

KEIHANNA SCIENCE CITY

KEIHANNA SCIENCE CITY (not included in Osaka’s key indicators) 21MW in operation across 2 data centres* 28% vacancy rate 18MW UC / 11MW planned

CENTRAL OSAKA

*Definition: Key indicators are based on operational Hyperscale Cloud, Colo, Edge & Telco data centre facilities in the market and excludes Captive & ICT. All values IT MW.

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Source: Cushman & Wakefield Research (Q1 export March 2023)

Cushman & Wakefield

OSAKA Expect Limited Supply to Reduce Vacancy to Below 10%

Hyperscale-Occupied Hyperscale - available Occupancy %

50,000

100.0%

95.6%

45,000

95.0%

40,000

90.1%

90.0%

35,000

30,000

83.5%

85.0%

83.0%

25,000

# rack

78.6%

80.0%

20,000

15,000

75.0%

70.8%

10,000

69.5%

70.0%

5,000

0

65.0%

2020

2021

2022E

2023F

2024F

2025F

2026F

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Source: Data Center Business Market Survey 2022, Fuji Chimera Research Institute

Cushman & Wakefield

PACIFIC REGION CABLE NETWORK STRONG GLOBAL CONNECTIVITY & LOWEST LATENCY WITH U.S. FROM JAPAN

• Strong global connectivity via 25 operational direct cables & 21 landing stations (7 new cables upcoming) • Lowest latency with East & West coast of U.S.A. via 11 direct cables (2 new cables upcoming)

Hong Kong Jakarta Mumbai Tokyo Los Angeles 148.234ms 183.351ms 262.483ms 153.834ms 231.021ms 162.627ms 99.37ms New York 269.684ms 231.021ms 237.683ms 275.556ms 245.217ms 209.9ms 176.751ms Shanghai Singapore Sydney

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*Source: WonderNetwork

Cushman & Wakefield

The Future: Commercial Real Estate Implications

WHY JAPAN? Factors for Market Entry

Opportunities

Network Connectivity Low Latency

Positive Spread for Investment

Rising Geopolitical Risk

Policy Incentives Rules of Law

Low Cost of Capital

Risk Factors

High Barriers to Entry

Limited Power Availability

Risk of Obsolescence

Climate Risk Earthquake

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Note: Construction cost is estimated at JPY 1.7M per KVA, equivalent to xx% increase form 2021 (1 USD = 140 JPY) based on the corporate forecast median value for 2023-2024 according to BoJ Survey Results.

INCREASING ASSET AGE IN JAPAN OBSOLESCENCE = OPPORTUNITY FOR INVESTMENT

Greater Osaka

Greater Tokyo

sq.m.

sq.m.

Forecast

Forecast

1.2 M

60.0%

1.2 M

60.0%

55.8%

55.1%

53.9% 52.6%

52.9%

51.7%

1.0 M

50.0%

1.0 M

50.0%

44.4% 46.1% 45.3%

43.2% 43.0%

0.8 M

40.0%

0.8 M

40.0%

32.4%

0.6 M

30.0%

0.6 M

30.0%

0.4 M

20.0%

0.4 M

20.0%

0.2 M

10.0%

0.2 M

10.0%

0.0 M

0.0%

0.0 M

0.0%

2020 2021

2022 2023 2024 2025

2020 2021

2022 2023 2024 2025

DC with deterioration

DC in good condition

Obsolescense Ratio

DC with deterioration

DC in good condition

Obsolescense Ratio

Est. Replacement Cost of deteriorated facilities: JPY 673 billion (US$4.8 billion)

Est. Replacement Cost of deteriorated facilities: JPY 107 billion (US$0.8 billion)

Note: Defined according to large capital investment required. For Data Center assets, Obsolescence ratio = data center over 20 years old / Total Stock (GFA)

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Cushman & Wakefield

Source: Fuji Chimera Research Institute; Development Bank of Japan, C&W Research

SUSTAINABILITY

Power usage efficiency (PUE) - measures the effectiveness of data centre energy usage by determining the amount of power used by computing equipment, rather than other systems

Water usage efficiency (WUE) - measures how much water a data centre facility uses for cooling and other operational needs. WUE is the ratio of total water used at the data centre and is calculated by dividing annual site water usage in litres by the energy usage in kilowatt hours (Kwh)

Carbon usage effectiveness (CUE) - measures the carbon emissions from a data centre. CUE is the ratio of total CO2 emissions caused by total data centre energy consumption to the energy consumption of IT equipment

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THANK YOU!