Data centre sales soar to new heights
Investor interest in data centres in Australia has surged in 2024, with the ever-rising demand for digital infrastructure driving record investment activity.
Both the number and dollar value invested into existing and upcoming data centres has already surpassed previous highs, with several billion-dollar-plus transactions occurring this year.
The largest investment made into the sector was Blackstone’s acquisition of Asia Pacific data centre platform Airtrunk, which operates four hyperscale data centres across Sydney and Melbourne. At $23.5 billion, it was the largest data centre transaction seen globally.
Similar to other utilities, data centres are now considered to be critical infrastructure. Cloud computing, data generation and storage, online commerce, and streaming services have amplified the need for more data storage and processing facilities.
Add to this the rapid acceleration of Artificial Intelligence (AI), and the need to develop more data centres is becoming even more critical. This is driving more data centre development, with not just the number, but also the size of these centres expanding.
An Equinix data centre in Melbourne built by FDC.
This has led to the rise of hyperscale data centres, facilities designed to provide significant processing power which typically occupy over 10,000 square metres.
To keep up with the growing need for more data infrastructure, the existing supply of centres is set to nearly double over just the next four years, with CBRE estimating that the total value of data centres in Australia will grow from $23 billion to $40 billion between 2024 and 2028.
The majority of new data centre development is based in Sydney, which accounts for the vast bulk of upcoming supply. The most significant facility will be CDC Data Centre’s $1.4 billion investment into a 504MW facility across 20.1 hectares in Sydney’s Marsden Park industrial precinct.
The sheer size of these facilities, however, presents a challenge. Hyperscale centres require tens of thousands of square metres, space that typically competes with other users of industrial sites.
In addition to the high initial costs of developing data centres, another key challenge is powering them. Because data centres are so energy intensive, many operators are looking to renewable solutions to reduce their energy costs and environmental impacts.
Property developers and investors are watching closely as different cities begin to emerge as the winners of a global data centre race.
Despite the challenges, investment into Australian data centre infrastructure is unlikely to slow any time soon. In CBRE’s 2024 Asia Pacific Investor Intentions survey, data centres were investors’ second most preferred alternative asset class, behind healthcare, with 31% stating they would seek out these investments.
In addition to the growing need for more data infrastructure, stable income streams are a key drawcard for investors. Data centres typically operate under long-term leases, ensuring predictable returns, regardless of broader economic conditions.
As the need for more data infrastructure grows off the back of an expanding digital economy, data centres will see more investment and development. Moreover, sustainability is likely to become a growing focus of the sector as centres grow larger and require more energy.
