SINGAPORE — Keppel is doubling down on Japan’s booming data-centre market with a deal worth about S$1.55 billion, acquiring a 90% effective interest in two hyperscale facilities in Greater Tokyo.
The transaction involves Tokyo Data Centre 4 and Tokyo Data Centre 5, two freehold, fully fitted colocation facilities in Inzai City, one of Japan’s established hyperscale data-centre clusters.
The acquisition marks another major expansion of Keppel DC REIT’s presence in Japan as demand for data-centre capacity continues to grow across Asia.
A S$1.55 billion bet on Tokyo
The two facilities have a combined purchase price of ¥190 billion, equivalent to about S$1.55 billion on a 100% basis.
That represents a 2.1% discount to their combined valuation of approximately ¥194 billion.
Keppel DC REIT will take an 88.62% effective interest in each data centre, while Keppel Ltd., through Keppel Japan KK, will hold a 1.38% effective interest.
The existing operator will retain the remaining 10% in each asset, helping maintain operational continuity.
Keppel DC REIT’s share of the purchase price is approximately ¥168.4 billion, or about S$1.37 billion.
The transaction is expected to be completed in the fourth quarter of 2026.
The data centres are already fully leased
One of the biggest attractions is that the facilities are not speculative projects waiting for tenants.
Both data centres are fully occupied by four investment-grade internet enterprise and information-technology services clients.
Three of those four customers are new to Keppel DC REIT’s portfolio, potentially broadening its tenant base and reducing concentration risk.
The properties also have contracted average annual rent increases of approximately 2.8%.
Even more importantly, Keppel estimates that current rents are at least 30% below prevailing market rents, creating potential upside when leases are renewed or reset.
Japan is about to become much more important
The acquisition significantly changes the geographical balance of Keppel DC REIT’s portfolio.
Before the transaction, Japan accounted for approximately 9% of portfolio rental income.
After completion, that figure is expected to rise to approximately 23%.
Singapore will remain the REIT’s anchor market, contributing roughly 60% of portfolio rental income.
That means Japan is rapidly becoming one of the most important markets in Keppel DC REIT’s regional strategy.
The leases offer different timelines
The two facilities also provide a mix of medium- and longer-term income visibility.
Tokyo Data Centre 4 has a weighted average lease expiry of approximately 4.5 years, while Tokyo Data Centre 5 has a significantly longer weighted average lease expiry of approximately 10.6 years.
Combined with contractual rental escalation and the potential to move rents closer to market levels, Keppel DC REIT sees several avenues for future income growth.
Why Tokyo?
Japan has become an increasingly attractive data-centre market because of its large digital economy, strong connectivity and growing demand for cloud computing and artificial-intelligence infrastructure.
Inzai, where the two facilities are located, is already one of Greater Tokyo’s major hyperscale data-centre clusters.
For Keppel, expanding there also creates opportunities to build relationships with more institutional investors, technology companies and operating partners.
Keppel said the transaction will deepen its presence in one of Asia-Pacific’s most attractive data-centre markets.
Keppel DC REIT expects an immediate benefit
The acquisition is expected to be immediately accretive to distribution per unit (DPU), meaning the transaction is expected to increase the income available to each REIT unit after completion.
Keppel DC REIT plans to fund its portion of the acquisition through a combination of equity and yen-denominated debt.
The REIT has also launched a private placement targeting at least S$600 million to help finance the transaction.
Another step in Keppel’s data-centre expansion
This is not Keppel’s first major investment in Tokyo.
The company has been steadily expanding its Japanese data-centre footprint, including an earlier acquisition of Tokyo Data Centre 3 in Inzai City.
The latest deal therefore looks less like a one-off purchase and more like another step in a broader strategy to build scale in Japan.
Following the acquisition, Keppel DC REIT’s assets under management are expected to reach approximately S$7.6 billion.
The bigger picture
The deal comes as data centres become increasingly important infrastructure for the digital economy, particularly with the rapid growth of cloud computing, AI and data-intensive services.
For Keppel, the strategy is clear: secure high-quality facilities, lock in long-term tenants and position the portfolio in markets where demand for digital infrastructure is expected to remain strong.
And with Japan’s contribution to Keppel DC REIT’s rental income set to jump from 9% to 23%, the S$1.55 billion Tokyo deal could be one of the company’s biggest bets yet on the future of Asia’s data-centre economy.
WWC ONE MEDIA J.M.D
Leave a Reply