Sydney, Melbourne Key Markets for Data Centres

Two Australian capitals have been tipped as emerging hotspots for data centre investment in the Asia-Pacific.

A report from global real estate services firm Cushman and Wakefield found that Sydney and Melbourne are positioned to become key markets over the next five years.

Its latest Asia-Pacific Data Centre Update showed that five cities—Shanghai, Beijing, Singapore, Tokyo and Sydney—accounted for 62 per cent of operational data centre capacity in the region. 

Sydney and Tokyo are expected to exceed 1 gigawatt (GW) of operational capacity within the next one to two years, joining Beijing and Shanghai. 

Other newer markets are also emerging and growing rapidly in Indonesia, Malaysia, the Philippines and Thailand—all four countries are forecast to more than double operational capacity over the next five to seven years. 

Increasing data consumption was not the only factor driving growth, according to Cushman and Wakefield data centre research and advisory director, Asia-Pacific, Pritesh Swamy.

“The potential capacity of land banks in some mature markets is greater than the combined total capacity of both under-construction and planned pipelines,” Swamy said.

“While it could take more than 10 years to develop these land banks, operators have started to explore other locations.”

▲ AirTrunk has 10 data centres across Asia-Pacific and Japan with four in Australia, including the largest in the region.

Cities with populations of more than a million people are often considered good locations for smaller data centres. 

More than 80 per cent of operational capacity in the Asia-Pacific is concentrated in Australia, India, Japan, Singapore and mainland China.

“Across [the Asia-Pacific region], 9.7GW is currently operational, with an additional 3.3GW under construction and 8.5GW in planning stages,” Cushman and Wakefield data centre advisory team director, Australia, Alex Moffatt said. 

“For Australia 1145MW is currently in operation, 265MW is under construction and 1443MW is planned.”

Sydney is the largest data centre market in Australia with 63 per cent of Australia’s total operational capacity. 

“Operational capacity in Sydney has increased by 57MW during the past six months,” Moffatt said. 

“Despite this additional capacity coming online, the vacancy rate for Sydney has decreased from 17 per cent to 12 per cent during the same period.”

Sydney’s geographic location and subsea cable connection will ensure it remains relevant as a key market for data centres in the region.

But Sydney and Melbourne also pose specific challenges for investors.

“The next wave of data centre development will see builds exceed 100MW per site in Sydney and Melbourne,” Moffatt said.

“Finding suitable land parcels in Sydney and Melbourne for future data centre development continues to be challenging given the lack of suitably zoned land in those markets.”

Moffatt said the increase in demand is associated with continued digitisation of people’s work and personal lives and the increasing uptake of artificial intelligence. 

“We anticipate that many markets across [the Asia-Pacific region] will witness accelerated growth owing to technological enhancements such as the adoption of AI, cloud services and the deployment of 5G services,” Moffatt said.

“Ongoing government and enterprise digitisation initiatives will also drive requirements for additional capacity.”