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While Australia’s growing technological needs have driven significant expansion in the data centre industry, the sector is still facing a range of logistical challenges.
A recent report from M3 Property has revealed that demand for data centre facilities is surging across Australia’s major property markets, with 135 co-location data centres operating nationwide across Sydney, Melbourne, Brisbane, Perth, Adelaide and Canberra.
With an estimated 183,000 square metres of data centre space currently under construction, M3 Property noted that three-quarters of this new supply will be located in Melbourne, and the remainder in Sydney.
The valuations firm also forecast that further supply is expected to be received in Canberra and Brisbane over the next decade.
Weighing in on this growth, national director of specialised assets at M3 Property, James Ruben, stated that data centres’ status as an “ancillary use of office, retail or industrial property” has shifted as a result of the “rapidly growing demand for data centres in Australia”.
“In addition to data storage, new technologies such as AI and 5G, the growth of e-commerce, data security requirements, and the need for companies to provide reliable and secure IT and data service to a workforce that is more likely to work from home is leading to the need for developers to build bigger and more secure purpose-built data centres,” he said.
Even with this increased demand from users and investors, Ruben emphasised that the sector is still contending with a range of challenges.
He highlighted the shortage of appropriately zoned, available land in major markets as a pressing difficulty which has been further intensified by the “limited greenfield land being released by state governments”.
“Available land is also sought by developers looking to construct new logistics and distribution warehouses, competing with data centre developers. This is creating strong competition and driving up land prices,” said Ruben.
The report also relayed that it has grown increasingly difficult for data centres to gain access to an adequate power supply, especially as facilities become larger and require more energy.
In response to these difficulties, the national director said that “many industrial land owners and developers are becoming open to the idea of building powered cold shell facilities aimed at the data centre to gain exposure to this asset class”.
Ruben further detailed that sourcing renewable power has become a “top priority” for the data centre industry, noting that advances in “immersion cooling, artificial intelligence to better manage workloads, and renewable energy” have helped the sector to increase its environmental sustainability.
M3 Property also highlighted that construction costs for data centres have grown increasingly difficult as a result of long lead times induced by labour shortages and material constraints, and the increased size and power intake required by newer centres.
The firm’s findings showed that the average cost of building a data centre in Australia currently ranges from $13.40 to $15 per watt, marking an increase of roughly “4–5 per cent” from one year prior, and making Australia one of the costliest markets for data centre construction in the Asia-Pacific region.
“Recent reports have suggested that two to three years ago, a 5-megawatt data storage centre would cost between $15 million and $20 million to construct. Now a new facility may be over a hundred megawatts and this requires a whole new level of investment,” Ruben concluded.
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