In 2024, investor demand for data centres in Australia has reached unprecedented levels, driven by the ongoing expansion of digital infrastructure. As a result, investment activity in the sector has broken previous records.
The amount of capital flowing into both existing and new data centres has exceeded past benchmarks, with multiple deals surpassing the billion-dollar threshold.
The largest deal to date was Blackstone’s $23.5 billion purchase of Airtrunk, a key player in the Asia Pacific data centre market with major hyperscale operations in Sydney and Melbourne. This acquisition represents the largest data centre deal in history.
Data centres have increasingly become a vital part of critical infrastructure, similar to other essential utilities. With the rise of cloud computing, data generation, storage, e-commerce, and streaming services, the demand for more data storage and processing capabilities has grown exponentially.
The rapid growth of Artificial Intelligence (AI) further fuels this demand, making the expansion of data centres even more urgent. This has spurred significant development in the sector, not just in the number of data centres, but also in their scale.
As a result, hyperscale data centres are emerging, designed to meet the immense processing power requirements. These facilities, typically spanning over 10,000 square metres, are becoming increasingly common in response to this growing need.
As demand for data infrastructure continues to soar, the existing data centre supply in Australia is projected to almost double within the next four years. CBRE predicts the value of the data centre sector will increase from $23 billion to $40 billion between 2024 and 2028.
Sydney remains the main hub for this growth, accounting for a significant portion of the upcoming developments. The largest project will be CDC Data Centre’s $1.4 billion investment in a 504MW hyperscale facility situated on 20.1 hectares in Sydney’s Marsden Park.
However, the size of these hyperscale centres presents a challenge. They require large parcels of land, often tens of thousands of square metres, which creates competition with other industrial developments for space.
Alongside the significant upfront costs of building data centres, powering them remains a major hurdle. Due to their high energy consumption, many data centre operators are increasingly turning to renewable energy solutions to lower both their operational costs and environmental footprint.
Nonetheless, the momentum behind investment in Australian data centres is expected to remain strong. CBRE’s 2024 Asia Pacific Investor Intentions survey revealed that data centres were the second most favored alternative asset class by investors, with 31% of respondents expressing interest.
The steady demand for more data infrastructure, paired with the stable returns these facilities offer, makes data centres an appealing choice for investors. Long-term leases are common in the sector, providing predictable cash flow that is less susceptible to broader economic fluctuations.
With the digital economy’s rapid growth driving the need for more data centres, investment in this area is set to increase. Moreover, as the sector expands, sustainability concerns will likely take on even greater importance due to the increasing energy demands of these large facilities.
