British Business Awards 2022: One Year On – ESR Group

Third-largest global listed real asset investment owner and manager of new economy real estate ESR Group Limited was crowned Company of the Year at the British Chamber of Commerce in Japan’s 2022 British Business Awards (BBA). At the time, Stuart Gibson, co-founder and co-CEO, pledged to continue to strive for excellence and business opportunities for the firm.

With ESR being ranked largest real asset manager in APAC and third-largest global listed real asset investment owner as recently as January 2022, the firm was already leading its sector when it scooped the 2022 BBA, but the past 12 months has seen ESR continue its expansion: by increasing its presence in the region, developing its adjacencies and pursuing new goals.

The BCCJ sat down with Gibson to learn more about what ESR is doing one year on from its BBA win and what the future might look like for the firm.

Last year ESR set up data centres in major data centre clusters across Asia and began renewable energy generation. Why did ESR expand into these areas?

We’re in the ecosystem of e-commerce businesses such as Alibaba, Rakuten and Amazon. We develop and own the real estate that houses and distributes their physical products, so we thought we could also look after the digital transformation and cater to the massive growth in Cloud usage and more recently the huge surge in AI. That was the start of our data centre business—a great adjacency to our distribution centre business.

ESR has more rooftop solar than any other company in Asia Pacific and generates the most solar rooftop energy in Japan. We generate energy on our rooftops and sell it to our customers (who use the distribution centres) to create an integrated energy network. There is always surplus energy, which is stored in grid-scale batteries, so when the sun goes down customers can maintain consistent power.

As data centres need an immense amount of power, including for processing and cooling, it made sense for us to direct the surplus energy created from our distribution centres’ solar panels to our data centres. In the past year, we’ve built a separate energy company to service our data centre business.

What has been the impact on your ESG goals?

Our goal is to decarbonise as much as we can. We have a great decarbonisation programme underway and our carbon footprint is going down. It would be unrealistic to take a data centre completely off grid but we can get our distribution centres off grid, running completely on solar energy. We’re using Japan as a test bed for this because if things work in Japan, they’ll normally work in South Korea and Australia. In Japan we expect our first off grid distribution centre to be finished within the next nine months. It will still have a connection to the grid just in case, but the expectation is for it to run completely on renewable energy.

In terms of decarbonisation, a lot of companies talk about ESG but it’s really a box-ticking exercise for investors. We think ESG is good for business.

What is the latest in ESR’s data centre business?

In Japan we have 350 megawatts’ worth of data centres coming out of the ground, with the Asia Pacific centres totalling about 670 megawatts. In November 2022, we broke ground on a 102 megawatt data centre in Osaka. A week ago we completed phase one of the construction’s three phases. The roof is on, and we’re buying all the kit to go inside such as generators for an uninterrupted power supply.

Our data centre business will continue to grow because data usage is only going to increase. AI will exponentially drive demand for data and its storage and processing, but even something as simple as the increased use and storage of secure high-speed financial transactions will drive the need for more data centre facilities.

How is ESR keeping pace with technological change?

We’re doing more and more with e-commerce companies. If you buy something in Japan from Rakuten, Amazon or Alibaba, there’s a 50% chance it comes from an ESG distribution centre. By and large, these buildings don’t change; we build them to be as flexible as possible to incorporate new technology. It’s the tech inside that changes. We have a lot of high-tech assets, including automation, robotics and AI. There is capability for predictive ordering for certain days or certain types of product. It’s rare that anything stays in our distribution centres for more than three days.

ESR has been very successful in community engagement. What advice would you give other firms?

We’re very well known for giving something back in the communities we operate. It’s one of our core values. Our facilities have large physical footprints and there is disruption during construction and an increase in traffic during operations. We move traffic lights and build new roads to mitigate problems in communities as much as we can. We like to be up front with local leaders and individuals: explaining what will happen, how long it will take and how we will give back, including through free childcare facilities and community centres. There has to be harmony between us and the people who live there.

No matter what industry you’re in, it’s important to look at the negative impacts you have on a community and consider what you can do to counter that and then make a positive impact, because at the end of the day, you’ll be judged on how the community receives you.

What’s next for ESR?

We have new parts of the business that we expect to grow. Southeast Asia is pretty new to us and we’ve done quite a lot of recent M&A in the region. We expanded into Thailand with four logistics and industrial projects and have a growing business in Vietnam and Indonesia as well as the Philippines. We like infrastructure and expect to be growing our renewables energy business in the aforementioned markets. We also want to do a lot more in the areas of offshore wind, onshore wind and solar, while developing opportunities in the Middle East.