Data Centres the ‘Engine Room’ of Digital Infrastructure

Australian commercial property is increasingly seen as an investment safe haven as negative interest rates and global economic uncertainty push institutional investors back into bricks and mortar.

And according to consultancy Turner and Townsend, data centre construction is a major growth area for capital investment.

There are more than 100 data centres in 14 locations across Australia, with a robust pipeline of development.

Turner and Townsend high tech sector lead Andrew Abdalla said heavy investment in digital infrastructure and data centres is supporting the construction industry.

“The data sector as a whole is active with investment in new facilities and the expansion of existing facilities,” Abdalla said.

“Major data centre projects are expected to be built in Western Australia over the next five years with global players using connectivity links between Australia and Asia.”

Former NextDC landlord 360 Capital listed on the ASX on Monday with its 360 Capital Digital Infrastructure Fund after raising an oversubscribed $65 million for the fund’s initial public offering.

The fund already has a portfolio of three data centres, and has plans for another seven to eight as well as fibre connectivity assets and 5G infrastructure projects.

Related: Lendlease Invests $1.4bn in Data Centres

Fund manager and former Nextgen Group chief executive David Yuile told the Financial Review that he is confident appetite for investment in digital infrastructure will grow the fund to the $1 billion mark within five years.

“We’re seeing so many projects and opportunities. The industry is still very early in the cycle,” Yuile said.

Meanwhile, Nasdaq-listed data centre giant Equinix, which entered the Australian market last year in Perth, announced a $1 billion joint venture with Singaporean sovereign wealth fund GIC last month to develop and operate new facilities.

Australian development giant has also flagged plans to launch $1.42 billion worth of data centres as part of a mystery joint venture across the Asia-Pacific region.

Abdalla said that there is strong demand for hyperscale facilities.

“The move to hyperscale makes sense for co-location providers [to] gain a competitive edge with economies of scale.

“The market is also still growing with many new greenfield site proposals in the data sector utilising hyperscale-sized facilities.”

Turner and Townsend’s third quarter Real Estate Market Insight report forecasts construction costs to rise 4 per cent in Sydney, 3.5 per cent in Melbourne, 3.3 per cent in Brisbane and 0.5 per cent in Perth over the next year.